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Berkshire Hathaway Inc. Message Board

  • Novalis_97 Novalis_97 Jul 28, 1998 8:17 AM Flag

    Why BRK is

    At 84,000 a share in June, BRK was overvalued.
    How do we calculate BRK's intrinsic value? Let's
    listen to Buffett himself (from 1997 annual letter to
    shareholders):

    "In our last two annual reports, we furnished you a
    table that Charlie and I believe is CENTRAL to
    estimating Berkshire's intrinsic value. In the updated
    version of that table, which follows, we trace our two
    key components of value. The first column lists our
    per-share ownership of investments (including cash and
    equivalents) and the second column shows our per-share
    earnings from Berkshire's operating businesses before
    taxes and purchase-accounting adjustments (discussed on
    pages 69
    and 70), but after all interest and
    corporate expenses. The second column excludes all
    dividends, interest and capital gains that we realized from
    the investments presented in the first column. In
    effect, the columns show what Berkshire would look like
    were it split into two parts, with one entity holding
    our investments and the other operating all of our
    businesses and bearing all corporate costs.

    1967 $
    41 $ 1.09
    1977 372 12.44
    1987 3,910 108.14

    1997 38,043 717.82

    Here are the growth
    rates of the two segments by decade:

    1977
    24.6% 27.6%
    1987 26.5% 24.1%
    1997 25.5%
    20.8%
    1967-97 25.6% 24.2%"

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • Mr. Guru:

      >>>
      What leads you
      to believe that the stock market is going to tank on
      Friday August 14, 1998. Please justify.

      <<<

      What makes you think he actually believes it? :-/

    • Mr. Infernal:

      >>>
      it seems
      that the issue is the proper *reporting* of the value
      of those options with respect to the balance
      sheet.
      <<<

      Ok, this makes sense. I must have
      misunderstood.

      >>>
      The motivational aspect of options appears to be
      widely agreed upon by managements of small start ups.

      <<<

      Gee, as it so happens, I am the CEO of a small
      startup. :)

    • Could that happen??

    • it's a nutty prediction to give us a crash date,
      etc., but the fact is, this is a tired market. look at
      the number of new highs and lows. i am looking for a
      pullback in the autumn, which seems to be when they occur.
      i am gong to try to grit my teeth and hang onto
      brk, which always pulls through and is capable of
      spurts i don't want to miss. meanwhile i have begun a
      gradual selloff of other stocks, protecting profits like
      the big guys do. i won't sell everything. i'm just
      kind of straddling the road a bit.

    • Mine's still broken.

      JimC

    • What leads you to believe that the stock market is going to tank on Friday August 14, 1998. Please justify.

    • iamgeorgesteinbrenner iamgeorgesteinbrenner Jul 30, 1998 10:07 PM Flag

      sell everything the market is going down on august 14th it won't be back up till may23, 1999

    • Mr Keith,

      Regardless of whether stock
      options are a good motivator or not, it seems that the
      issue is the proper *reporting* of the value of those
      options with respect to the balance sheet. This is useful
      information to have when evaluating earnings etc. To the
      extent that options of this sort are not accurately
      reported or valued, people might be misled into thinking
      fully diluted earnings are higher than they actually
      are.

      From that vantage, options *are* an
      issue. The motivational aspect of options appears to be
      widely agreed upon by managements of small start ups.


      Cheers

      - infernal

    • from the 2nd quarter, posted
      today:

      Financial services liabilities: June 30 98 Dec 31, 97

      Securities sold under agreements to
      repurchase, at
      contract value 1,303 1,030
      Securities sold but not
      yet
      purchased, at market value 970 1,190

      Sorry
      this lines up so crummy. Here's the URL, which
      displays just
      fine:
      http://biz.yahoo.com/bw/980730/general_re_1.html

    • Mr. Ouch:

      >>>
      But Microsoft
      shouldn't have been paying its employees with stock options
      in the first place, which dilutes everyone else's
      shares.
      <<<

      I assume you're parroting the Forbes
      article?

      Would you rather own 10% of a company worth a million,
      or 1% of a company worth 10 billion?

      How do
      you motivate your employees to produce the extra 9
      billion, 999 million in value?

      The problem with the
      bean counter approach to management, is it ignores two
      main things:
      1) not all men are equally
      productive
      2) each man has a choice of how hard to work (free
      will)

      The bean counter says "now that we've got this here
      10 billion dollar company, how do we divvy up the
      beans?"

      It's a losing method.

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BRK-A
219,290.00+3,490.00(+1.62%)May 4 4:00 PMEDT