I_statland & balt, I've waited five years for this quarter.
A little bit of history. When the 2006 annual report was issued in early March of 2007 the koolaid klowns immediately declared BRK to be worth 177% of book value. They came to that conclusion by using the two column method. They multiplied $3,625 of pretax earnings per share by 12, added that to $80,636 of investments per share, and divided the result by $70,281 of book value per share. By the way, to the best of my knowledge, that's the same method WT uses.
For the next six months I argued on both the BRK-A board and a moderated board that they were wrong. I used several methods to illustrate why that valuation couldn't be correct. I was verbally trashed for my efforts. I finally gave up the fight at the start of the 4Qtr. THEY continued to pump BRK until they had successfully pushed it out to an intra-day high of 195% of most recently reported BV (3Qtr) on December 11, 2007.
Needless to say, the sellers made a killing at the expense of the naive buyers. I feel bad for the buyers, but what can I say? They voluntarily bought the stock based either on the valuation story or the momentum it created. But the sellers didn't win completely. Most had only sold their "traders", a small fraction of their total position. Their efforts during 4Qtr2007 would ultimately result in the trashing of their "core" positions (the shares they plan to hold forever). In 2011 WEB announced that he won't pay more than 110% of BV on a buyback, hinted that 110% might be 90% of true value (122%), and at the annual meeting this year volunteered that he would be a reluctant buyer at 115%. It would appear that there is some justice in this world after all. Please excuse me when I laugh.
Understood--no forgiveness needed. I showed up at the BRKA board after running my own analysis--which ,like New Jersey, understands that "book value" is a function of the water .level.
In part because HC --who knows what he knows --and was active on the byd (not byddy.pk) board, which i was working to trade into accumulation, where he steadfastly maintained that the brka board was chock full of people who know how to play this game.
Outside of purely speculative plays (what i call "story stocks") all this take this and add that then multiply by the aquare root of wish in one hand times the weight of Ben Graham's cat is to me..basically? a joke.
And saying so, straight out, caused me to be joyously reviled by many a brka poster.
During that time, my clients all got largish chunks of BAC @ 3 9/16, and large chunks of NOK @ 2 even. How? By sticking to the idea that reality ends up on the tape, not the .xls.
" They voluntarily bought the stock based either on the valuation story or the momentum it created. " Or by ignoring a 0-sum rule that got Freidman famous.."inflation" results from more cash chasing the same amount of goods. In my practice I explain this by saying that the volume a balloon displaces is a function of air flow in/out--and that can change wildy without affecting actual mass more than a fraction.
I still see BRK as nothung more than a bet on America in general, and until next wednesday, the ball has been thrown...and it's past time to place any bet.
I have been an aggressive buyer since January 2010... in split adjusted terms, starting in the 60s. I continue to buy now, and will continue so long as it is trading at below the intrinsic value.
You might say that my timing had been too ideal... that 2010 and forward were particularly good. Your prediction was in 2007, so I went back to look how Berkshire fared vs the S&P. In 2007, the year of your prediction, Berkshire outperformed the market by 25 points. In 2008, Berkshire beat it by 7 points. 2009, the market outperformed Berkshire by roughly 20 points. In 2010, Berkshire again beat the S&P by about 8-9 points. In 2011, the SP won by 4, and in 2012, Berkshire won by 3. This means, since your prediction (counting the year 2007 as you put the prediction early in the year), Berkshire has beaten the overall market in four out of the two years. I applaud your willingness to put out a prediction early, but to now "laugh" at those that bought Berkshire rather than selling, seems strange given the record.
More importantly, the true (earnings) value of the company continues to expand nicely... adding value through acquisitions and continued expansion of existing businesses. For example, purchasing solar farms that have 25 year contracts in place to sell the electrical power from the sun for a nice profit... I like that... a bet that the sun will shine and people want electricity.
You can laugh as you wish... but, no need to ever feel sorry for me or my fellow investors in Berkshire.. we are doing fine..:) :)