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Berkshire Hathaway Inc. Message Board

  • csink1 csink1 Mar 19, 1998 9:33 PM Flag

    At a premium?

    Is Berkshire valued at a premium? It sells for 2.5 times book value and grows book value at 24% a year. The average company is valued at higher than that and grows at a much lower rate. Even Buffett says in the this year's report that Berkshire has almost never been overvalued. Obviously, it has been likely the most undervalued stock on the exchanges.

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    • Your messages are informative and educational to all, seasoned investors or not. Please try to post daily.

      Hoped we can spot you among the crowd in May.

    • While entry price is important for Berkshire or any other investment, the most important thing is to develope an investment philosophy that fits your thinking, make informed decisions based upon that philosophy, and act.

      If you look at the history of Berkshire or stocks in general, even if you had overpayed by as much as 10% at any time, 10 years later it makes little difference. Especially considering the much greater risk of taking no action at all.

      If someone had starting 30 years ago putting a set amount of money, adjusted up or down each year with market performance, into a S&P 500 index fund, and had the bad luck to pick the exact highest day each year to make the investment, he would still have done quite well over the years.

    • I mean I put the money in saving for a short time and not for perpetual. As long as it give me positive carry, I have chance and time to wait for a better and reasonable entry price to start new stock position.

    • Please look at the graph and decide for yourself.

      symbols: SPX = S&P 500, BRK.A = Berkshire,BRK.A

    • I strongly suggest you take the time to go back and read a good chunk of the messages on this board before you decide to by or pass on Berkshire. Just coming on and asking for advice is overlooking what has gone on before.

    • The Happy Hooker, Xaveria Hollander
      (sorry, couldn't resist)

    • Actually, leaving money in a bank to earn interest and you'll be losing buying power. Assuming you get 3.5% interest (which
      is generous), the inflation rate will have to be below 2.3% in order for you to actually build any wealth. If your bank only
      gives 3%, then your inflation rate will have to be below 2%. Especially in periods of high inflation, savings accounts eat up your
      buying power. To actually make any money you need at least 6% returns, which you can't get on CD's or T-Bills. Bonds just barely
      make anything with taxes and inflation included. If you can get over 6% then you're probably getting some returns after inflation
      and taxes.


    • Yes, I agree. BRK traditions will probably live on beyond Warren. E.g., no fancy, unnecessary frills. Treat employees well
      and reap the intrinsic value of loyalty. But there is no guaraantee. The Disney Co. puts out R-rated films. Would Walt do that?
      Warren is a famous guy, and when he passes on, inevitably some investors will question whether BRK can continue making brilliant
      investments. For example, when Warren corners silver, we don't worry. He almost certainly knows what he's doing. He has a track record.
      What's more, when he screws up, he admits it. When someone else makes these plays, we will worry more. The marketplace will set a
      price on that worry by taking a slice out of the stock price. When Warren passes on, the stock I think must fall. Perhaps 10 or 15
      percent, hard to say. These are human factors, not financial ones. Then, in the next couple years, if the successors do as well as he
      did, the stock will almost certainly bounce back. Those who held and bought more will be rewarded. If it works the other way,
      there will be more slices taken out of the price.

    • $200 in bank can still earn nearlt ridk free interst and have a chnace to invest in stock later.

      Also, Webfan idea on entry price is right. For Example share price rise from 20 to 100 is 5 times but from 25 to 100 is just 4 times.

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