"Unsurprisingly, the ratio of price to estimated value is a pretty good predictor of whether you're about to see unusually good or unusually bad price changes."

The ratio is not only a good indicator of when to buy, it is also a good indicator of optimal asset allocation (in tax deferred accounts), if you're into tactical asset allocation. The top 30% of price/value lead to returns that are less that the yield on T-Bills. A Kelly type allocation between BRK stock and T-Bills might look something like the following, VERY CRUDELY, or perhaps a bit more heavily weighted toward BRK stock:

P/value bucket, optimal BRK/T-Bill ratio

bottom 30%, 100%/0%
next 20%, 67%/33%
next 20%, 33%/67%
top 30%, 0%/100%

Buffett might say 90% BRK/10% T-Bills all of the time, but the table says 0% BRK/100% T-Bills when price/value is above the 70th percentile of its range.

Berkshire Hathaway FAQ

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