No. of Recommendations: 11
Let me clean my thoughts up a little bit.
a) The KBW report brought issues related to auto insurance margins, falling ST treasury yields, or poor performing businesses vs peers. BRK recent underwriting profits have been significantly above long term trends. However, only an idiot would use recent performance to value BRK. 2024 margins were 10%+. I used 3.3% for my valuation. I would add that 2025 may be near or at record levels.
b) KBW projected lower rates on ST treasuries. The 5 grove model is unaffected by the current level of rates. Presumably as well, if rates fall so should required rates of return. Where did KBW incorporate this?
c) Whether the businesses have been performing poorly or not, they are improving. The market is more interested in where you are going. 9% YTD YOY performance sounds pretty good to me.
d) "Despite what some commentators currently view as an extraordinary cash position at Berkshire, the great majority of your money remains in equities. That preference won’t change. While our ownership in marketable equities moved downward last year from $354 billion to
$272 billion, the value of our non-quoted controlled equities increased somewhat and remains FAR greater than the value of the marketable portfolio."
Similar to Buffet claims that IV is far greater than BV. (I misspoke on this before).
So just to summarize. Short form valuation. Marketable securities net of tax $260 BB. Cash $375 BB. So if non insurance businesses are worth $380+ BB then BRK is worth a $.1 trillion. I assume that non insurance business may be worth at least $100 BB more than $380 BB .
Of course with 5 groves I get a value closer to $540 per share. See my previous post.
