No. of Recommendations: 13
My Groves are:
1) Operating Earnings at 15X - $190
2 - Equities - $104
3 - Partially Owned Businesses - $19
4 - Cash & Equivalents - $146
5 - Underwriting gains - $16
Total - $475.
Let me know if you get any differences for any of the Groves. Then we can compare?
OK, it took me longer than I thought it would. It's been a long time since I've done this, so bear with me. My initial numbers are quite different, probably because I'm screwing something up. I get:
1) Operating Earnings at 15X: $21,721m, divided by 2171m B-equivalent shares, =$10.00/sh, times 15 = $150.07. You got $190.
This was the most labour intensive to get. I used the numbers reported in Item 2, Results of Operations, (p.30 in the Q3 report), giving the post-tax earnings from BNSF, BHE, Pilot and Manufacturing, Service and Retailing (MSR). I obtained this for the last 12 months by adding Q3, Q2 and Q1 numbers, and 2023 Q4 numbers that I got using the 2023 full year numbers from the annual report and subtracting the numbers from preceding Q1, Q2 and Q3. This gave me $21,721m, divided by 2171 B-equivalent shares, and finally multiplied by 15.
2 - Equities - $271,650m, divided by 2171, = $125.12, then I subtracted 21% of the unrealized equity gains (reported in Note 5, p.10), i.e. 21% of $193,538m divided by 2171m, giving me -$18.72 per share, total $125.12-$18.72 = $106.40. You got $104, so at least we are close here. There is an argument to be made that much of those unrealized gains will not be taxed for a long time, but this is not the year to make that argument :) and neither of us made any adjustment for that.
3 - Partially Owned Businesses - these are just KraftHeinz and Occidental and Other, and they have a carrying value of $30,133m and a fair value of $25,036m (using the fair value for KH and OXY and adding the carrying value of the Other Equity method investments, Note 6, p.11). Dividing by 2171m gives me $11.53 per share, a fair bit lower than your $19. Did you use carrying value? I still don't get to $19.
4 - Cash & Equivalents - I used 4 lines from the balance sheet on p.2: cash and cash equivalents from Insurance and other, $32,287m, along with Treasury bills, $288,031m, and investments in fixed maturity securities, $16,042m, and finally cash in Railroads, Utility and Energy, $4,894, for a total of $341,254m, or $157.18 per share. You got $146, maybe because you didn't count the railroad cash?
5 - Underwriting gains: Here I used the 23-year average earnings yield on premiums earned, 3.32% (you used 3.2%, which was the 22-year average last year), and I applied that to this year's $83,403m in earned premiums, for normalized underwriting earnings of $2,793m, divided by 2171m to give me $1.29 per share, and I multiplied this by 15, like in the 1st grove, to give me $19.30 per share. This is pre-tax; adjusting for 21% tax, I get $15.24 - you got $16, pretty much the same.
My grand total is $440.44.
I wish I had done this long calculation yesterday, when shares closed at $445.06 - maybe I would have just bought some shares. But they're up $24 today, so I guess I'll wait a bit longer. Did Berkshire just get 5% more valuable? Actually, I think it probably did, based on how beautiful the word 'tariff' appears to be to some ears.
Please feel free to correct/critique my numbers and my reasoning. Now that I have the Excel tab set up, it will be easy to update the data, but if there's a better way, I'm all ears.
Regards, DTB
