The article's calculation of intrinsic value left me somewhat puzzled. If the current intrinsic value is only $1 trillion, Greg Abel would definitely not announce a buyback plan at this time, as it clearly contradicts Berkshire's definition of the right timing for buybacks. Yet, the author concludes by affirming that Greg Abel will adhere to Berkshire's principles, which is utterly contradictory and baffling.
I hear what you're saying. Let me push back a bit. I've tried to be very conservative. If Greg thinks the value is $1.1 trillion and it's at $1 trillion (a ~10% discount), he might conclude that buying makes sense. I'd *expect* him to know better, that's why I trust his judgement.
Even Warren said that he and Charlie would differ in their calculations but would be close. I'd bet a lot of money that Greg doesn't think it's worth $1.5 trillion and that we're closer than you think. I suspect when we see the Q1 numbers, it'll show a modest amount of repurchase activity not buying hand over fist like a few years ago.
And I could be wrong. My friend Chris Bloomstran has Berkshire at $1.2 trillion. I need to follow my reasoning and he follows his.
A rigorous and useful summary of Berkshire’s vast empire. Many will be grateful to you for drinking from the fire hydrant, so they don’t have to. I tend to agree with an intrinsic value, that may seem conservative, compared to some of the other areas of the market based on narratives about a future that may disappoint. Highlighting the BNSF Capex in excess of depreciation charges; wildfire liability risks and the unusually favourable insurance combined ratio, is exactly the type of rational discussion I enjoy. Builds trust and manages expectations and is a reflection of the culture at Berkshire.
The underwriting profits are perhaps even more noteworthy given the higher interest rates being earned on the float. Will be interesting to see how that develops over the coming years. There is certainly a huge skill factor at play but it does look unusually profitable for a commodity business.
While Berkshire may be fairly valued currently and management clearly agree, given the extremely low buy back activity at these prices, relative to other valuations, it’s an extremely attractive hold. Optionally, conservative accounting, capital allocation discipline and shareholder friendly management. For me the most attractive part of owning Berkshire currently, is how it’s positioned to negotiate difficult waters ahead. Cash, essential infrastructure, insurance, U.S. oil, consumer goods equities (Apple, Coke) and a diversified stable of wholly owned cash gushing businesses, makes Berkshire an incredibly attractive way to remain invested whatever the economic and market gods may unleash upon us. And as you pointed out, exposure to all kinds of large high growth areas.
Personally I would like to see Greg Abel buy back a large amount of shares at a discount to IV, that does happens from time to time (2020, 2009 for recent examples). It would be disappointing if he was doing it at current prices.
Thank you for a great article Adam! Much appreciated by your fellow shareholders.
The article's calculation of intrinsic value left me somewhat puzzled. If the current intrinsic value is only $1 trillion, Greg Abel would definitely not announce a buyback plan at this time, as it clearly contradicts Berkshire's definition of the right timing for buybacks. Yet, the author concludes by affirming that Greg Abel will adhere to Berkshire's principles, which is utterly contradictory and baffling.
I hear what you're saying. Let me push back a bit. I've tried to be very conservative. If Greg thinks the value is $1.1 trillion and it's at $1 trillion (a ~10% discount), he might conclude that buying makes sense. I'd *expect* him to know better, that's why I trust his judgement.
Even Warren said that he and Charlie would differ in their calculations but would be close. I'd bet a lot of money that Greg doesn't think it's worth $1.5 trillion and that we're closer than you think. I suspect when we see the Q1 numbers, it'll show a modest amount of repurchase activity not buying hand over fist like a few years ago.
And I could be wrong. My friend Chris Bloomstran has Berkshire at $1.2 trillion. I need to follow my reasoning and he follows his.
A rigorous and useful summary of Berkshire’s vast empire. Many will be grateful to you for drinking from the fire hydrant, so they don’t have to. I tend to agree with an intrinsic value, that may seem conservative, compared to some of the other areas of the market based on narratives about a future that may disappoint. Highlighting the BNSF Capex in excess of depreciation charges; wildfire liability risks and the unusually favourable insurance combined ratio, is exactly the type of rational discussion I enjoy. Builds trust and manages expectations and is a reflection of the culture at Berkshire.
The underwriting profits are perhaps even more noteworthy given the higher interest rates being earned on the float. Will be interesting to see how that develops over the coming years. There is certainly a huge skill factor at play but it does look unusually profitable for a commodity business.
While Berkshire may be fairly valued currently and management clearly agree, given the extremely low buy back activity at these prices, relative to other valuations, it’s an extremely attractive hold. Optionally, conservative accounting, capital allocation discipline and shareholder friendly management. For me the most attractive part of owning Berkshire currently, is how it’s positioned to negotiate difficult waters ahead. Cash, essential infrastructure, insurance, U.S. oil, consumer goods equities (Apple, Coke) and a diversified stable of wholly owned cash gushing businesses, makes Berkshire an incredibly attractive way to remain invested whatever the economic and market gods may unleash upon us. And as you pointed out, exposure to all kinds of large high growth areas.
Personally I would like to see Greg Abel buy back a large amount of shares at a discount to IV, that does happens from time to time (2020, 2009 for recent examples). It would be disappointing if he was doing it at current prices.
Thank you for a great article Adam! Much appreciated by your fellow shareholders.
Thank you, Gareth! Wonderful meeting you and Ben in Omaha!
I didn’t think you would remember! You were on our post meeting list of highlights! Really appreciate all your work keeping track of Berkshire.
Looking forward to reading the new edition. It will serve as inspiration to buy more, next time Berkshire is on sale!