No. of Recommendations: 16
Berkshire
TTM revenue $370 billion
TTM owner earnings $121 billion
Market cap $1 trillion
Tesla
TTM revenue $97 billion
TTM owner earnings $8 billion
Market cap $1.2 trillion
Buffett had this to say about its GAAP earnings, last year, in the annual report:
It is more than silly, however, to make judgments about Berkshire’s investment value based on “earnings” that incorporate the capricious day-by-day and, yes, even year-by-year movements of the stock market.
Operating earnings in 2023 were $37.4b, and $30.9b in 2022. Berkshire doesn't show this calculation in quarterly reports, but the underlying principle is the same: most of the 'earnings' just come from investment gains, and these are capricious and often transitory. For instance, in the first 3 quarters of 2024, net earnings before tax were $86.4b, but $46.2b of that was from investment gains.
Q4 is likely to be another really good year for earnings, and your $121b figure may be about right, but we should remember that about half of this is those capricious movements of the stock market, and be careful in comparing real business earnings like Tesla's $8b with the inflated earnings that Berkshire publishes (because it is forced to), especially in a year that has been great for its equity holdings.
Your point still applies - even backing out investment earnings, Berkshire trades at a much lower multiple of its real, sustainable earnings. Whether Tesla's growth is enough to justify its much higher multiple is anyone's guess - I would say no - but the discrepancy is not as great as the GAAP earnings suggest.
Regards, DTB
