No doubt, our insurance float is the key to building Berkshire. I see more and more articles popping up that mention Berkshire, Buffett, MidAmerican...
I agree that with the current rising ins. rates, other ins. companies faltering, combined with the bear market, the near future looks great for a triple AAA ompany like Berkshire.
Once Sept. 11 passes, I think a vast majority of our ins. policies will now exclude terrorist attacks, or if included, are priced properly. This should spike our profits a little as old policies are running of the books and being replaced by newer, pricier policies.
It looks like insurance will be on a real tear, and hopefully this bear market continues and 10 billion each year can be invested at rates providing 10% cash on cash returns plus some infaltion price level protection making the returns closer to 13% on 1% money.
Yep, I see the isurance buisness driving Berkshire.
The investment side has been a longer time coming than I thought in 1998.
I really think that as high as a mid 20's growth in net tangible value plus a simple mutiple on the non-ins buisnesses is possible.
Thats a great return. I'm sort of hoping we'll have one more buying op like last month to buy back the shares I sold around 67k last year to diversify from almost 100% of my liquid securities (exluding my wifes diversified stuff), to closer to 50%. Its been a good year for me in the market and I can buy back those shares and have more left-over.
If we are in a lethargic market, as bear markets end (end with a wimper not a bang), I wouldn't be surprised to see Berkshire languish in price despite ever increasing evidence of its sucess. But, if book value goes up 25%, its hard to imagine its market price being lower than it is around 75k.
What do you see as the biggest driver of growth in Berkshire? i think insurance will continue to be the main driver. I think in fact further expansion in insurance may be possible. Companies like MBIA and Ambac which insure municipal bonds would be a nice addition as would Title Insurance companies. I also think that given the current outlook, MidAmerican will grow tremendously over the next 5 years. I would not be surprises one bit if WEB dumped another 10 billion into MEC in the next 2 years alone.
Using 2q taking out a bit of cash, all property equipment, goodwill, receivables, mec and all stuff attributable to other than financial assets, which I proposed using a multiplier on, and income from non ins cos which I would use s multiple on earnings.
I get roughly122 billion in financial assets and 81 billion in liabilities for the insurance and finance co�s. And that�s with a 10 billion adjustment to make the losses and unearned premiums match buffets 38.5 float. Really I should deduct 6.7 billion in �other� if I was playing fair as the �other assets� are largely encompassed by accounting assets to offset the pain today liabilities put on the books. Maybe the deferred taxes wouldn�t all be counted by mr market either though. We�ll lop off a cool 10 billion over the payables and get 81 billion. That�s 41 billion net tangible times 1.4 = 57.77
On the income side, take out the insurance, investment income, and interest portions on both the revenue and expense and I get 1.045 billion. Mutiply by 2 for a year? Not sure how seasonal income is these days�lots of retail and I�d think 3q is best for construction? Hmm. Anyone got 3 billion pretax excluding all insurance investment and financial products�as last year came in closer to 1 billion (short some shaw etc) I �m not ready to count more than 2 .1 billion pretax reoccurring for non finance/ins/investment stuff.
Using the 15 times after tax 10 times pre-tax rule of thumb I guessed at that�s about 22 billion. Call it 80 billion total.
Again, I think the company will still be a good one, and will grow nicely between now and the hopefully distant future when the inevitable happens�but still I don�t think a terminal premium valuation post buffett much above that is warranted unless the conglomerate is broken up into smaller pieces that might each fetch bigger multiples and have different growth, anti-trust prospects.
he he, well it let me do that one...maybe it won't let me paste?
Me: without Buffett and Munger, I'd see Berkshire worth a modest premium over tangible book value of its insurance companies(which includes all the stocks and bonds less liability of insurance reserves)...say 1.4 times, and a simple multiple on the non insurance operating companies of around 10 times pre-tax 15 times after tax earnings. xxx
Randy: Isn't this pretty close to today's
Using the above I get it working out to about 80 billion or 54k per A. I guess that�s pretty close�depends on your timeframe.
I'm inclined to value stuff using a 10 to 12% discount rate and perhaps this throws in a bias. I'd expect average investing and deal-making skills post buffett and the job is made very difficult by the tens of billions to be allocated...I'd use higher ratios with fractional dollar amounts.
AND remember, that would be the figure today and I am sure that the number that method would yield will grow nicely each year�probably very nicely�perhaps above 15% for the next 5 years,. So I�m not arguing that the company isn�t worth a lot more today under buffett for a buyer satisfied with less than Berkshires internal growth rate.
I thought the same thing. We already have a "post-truck" valuation, except the market has put Warren, Charlie, Ajit, Lou Simpson and Rick Santoli ALL in the truck.
The market also assumes that no elephants will ever arrive and that, if they did, either Buffett or his successors, would miss them, even at point blank range, despite the fact that we've never missed them before. Oh, well.