No. of Recommendations: 6
Compared to the average valuation ratios seen in the last 15 years, using the price at the moment of $444.15 per B share:
Based on price-to-book value, you'd expect the price to be 13.7% lower
Based on ratio of price to peak-to-date book-per-share (a slightly better metric), you'd expect the price to be 14.7% lower.
Based on my own metric of fair value per share, you'd expect the price to be 17.5% lower.
In round numbers, at the valuation multiples typical of the recent era, you'd expect the price today to be something more like $368-383.
Maybe the old market values will not be typical of the present and future, but it's not a bad starting guess...
PS
You can also pencil in a "business as usual" expectation for the next year using those numbers.
Let's imagine US monetary inflation is 3.25% in the next year. (I think it might come in a bit lower, but we'll see). Let's say Berkshire's growth in observable value is a typical year, say roughly inflation plus 7.5%. So, if valuations were typical a year from now, then you'd expect a nominal share price in the vicinity of $407-426 per B share in August 2025. My best guess would be, oh, $413-415. That will of course be wrong, but I think it's a 50/50 shot whether it's too high or too low.
Jim
