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Berkshire Hathaway Inc. Message Board

  • astralagist astralagist Nov 4, 2007 8:34 AM Flag

    Will $133K Soon be the new Floor?

    2 Columns Method:

    $93,000/Investments plus $40,000/Operating Subs (Opertating Companies 10 times a conservative $4,000 a share Pre-Tax)= $133,000.

    Back of the envelope--a range of 10-15 times PT Op Earnings would yield a trading range of $133,000 to $153,000.

    There's margin of safety there. The Operating Companies have been growing Pre-Tax Earnings at 30% a year for more than 10 years. Know of any companies with that track record you can buy at 10-15 times PT Earnings?

    Based on this crude valuation method, here's my take on Berkshire:

    STRONG BUY: under $133,000

    BUY: $133,000 TO $153,000

    HOLD: $153,00- $163,000

    WEAK HOLD: $163,000-$173,000

    SELL: Above $173,000

    Note: my "sell" could surely be questioned. On a Pro Forma Fully Taxable basis---this values the Operating Subsidiaries using a PEG of 1.0. Thats cheaper than all 30 Dow Stocks. I just personally have a problem using PEGs assuming Growth rates above 15-20% on large companies..But if Berkshire ever gets truly "loved: ala Google, Apple, etc--you can surely make a case for $170-$200K

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