Halls of Shrewd'm / US Policy❤
No. of Recommendations: 2
No. of Recommendations: 1
That was a good read, thanks.
How many of us here think BRK is somewhat undervalued at current levels? I was thinking it’s not cheap at these levels, and I recently sold a bit for living expenses, but I’m often wrong!
No. of Recommendations: 14
How many of us here think BRK is somewhat undervalued at current levels? I was thinking it’s not cheap at these levels, and I recently sold a bit for living expenses, but I’m often wrong!
I think it comes down to a firm distinction between price and value.
It seems the current valuation level is a fair bit above the average in the last 15 years. Consequently, if valuation multiples hover around the same range in the next few years, the short term outlook for the price is not that great. Emphasis on "if" and "short term", but I don't see any reason to have a central expectation of a positive real price return in the next year.
But I think the actual fair value is a fair bit above the average observed market value. It's entirely possible for the stock to be trading at a price that is both above average valuation but below actual fair value.
To me, fair value for any financial asset is what will get me Siegel's constant: around inflation plus 6.5%/year without relying on an exit point at an above-average valuation level.
Berkshire has mostly returned a fair bit more than that without getting more expensive, so it has mostly been underpriced. By extension, the *average* price is a lot less than the *fair* price.
Jim
No. of Recommendations: 5
Summary of the article
CASH & EQUIVILANTS $157B
LONG TERM INVESTMENTS $373B
OPERATING COMPANIES $320B*
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$850B
OPERATING COMPANIES
* Earnings : $21.3B x 15 = $320B
tecmo
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No. of Recommendations: 5
I have a "five grove" model for intrinsic value(IV) that I have used for the last 5 years.
Things can bounce around a bit because of the equity portfolio valuation so I use Peak IV as my own reference point. If I did not think that IV generally was increasing continuously I probably would not be a shareholder. Measurement can be a little lumpy, though.
Although I cannot provide you with anything quantitative, I would say that having the market price exceed 90% of my Peak IV number is very, very unusual. Right now, market value is about 98.8% of my Peak IV. The market price on a relative basis is certainly on the high side in my opinion.
With that said I do think that we will see a new Peak IV when the year end numbers are released. Huge Q4 securities gains should be a big driver.
