Fri, Aug 22, 2014, 6:16 PM EDT - U.S. Markets closed

Recent

% | $
Quotes you view appear here for quick access.

Berkshire Hathaway Inc. Message Board

  • ignoramus_ ignoramus_ Aug 6, 1998 12:42 PM Flag

    GEICO refuses to give BRK discounts

    When I talked to GEICO about my car insurance, I mentioned to them that I was a BRK shareholder and requested a discount, but they refused to give it to me.

    Did it happen to anyone else?

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • Thanks for the repy I already figured it out before you could get to it but your reply was still helpful

    • Before or after taxes is not relevant. If, for
      that newspaper example, the newspaper's actual P/E
      (after-taxes) was 30 but Buffett's calculated "intrinsic" P/E
      was 25, then Buffett would determine that the
      newspaper was overvalued. If the actual P/E (after taxes)
      was 20, then he'd determine the paper was
      undervalued. Or you could use the pre-tax P/E values instead
      to determine whether the paper was over or
      under-valued. If the paper's actual pre-tax P/E was above 16,
      then Buffett would determine the paper was overvalued;
      if the paper's actual pre-tax P/E was below 16, then
      Buffett would say undervalued. Whether you use the
      after-tax or the pre-tax P/E is not relevant. Whichever you
      use, you want to compare that to a company's actual
      after-tax or before-tax P/E to determine whether the
      company is over- or under-valued. That was the point of
      that example.

      Look at Coke. It's P/E is around
      50. Its pre-tax P/E will, of course, be lower because
      EPS will be higher. But whether you use the after-tax
      P/E or the pre-tax P/E, you want to compare that to
      Coke's "intrinsic" P/E (what the P/E SHOULD be), as
      determined by discounting Coke's cash flow.

      The
      point of the newspaper example was not so much to say
      anything about using after-tax vs. before-tax figures but
      to show what the change in intrinsic value would be
      if you change the assumptions used in the perpetual
      annuity formula. If you say growth is 6% forever, then
      intrinsic value = $1 mil. / (0.10 - 0.06) = $25 million.
      $25 mil. would be the appropriate amount to pay if g
      = 6%. If the company's market capitalization is
      higher than $25 mil., then it's overvalued. On the other
      hand, if there is no growth over time but earnings "bob
      around" around an unchanging value, g = 0% and intrinsic
      value = $1 mil. / (0.10 - 0.00) = $10 mil. In this
      case, if the company's market cap. is $15 mil., the
      company is overvalued.

    • If anyone can answer this please help. Ive read
      all the information available and it looks as the
      Buffett pays such high P/E multiples because he figures
      his discounting process before taxes. You can see
      this in the 1991 Chairmens letter when he uses his
      example of a newspapers who's earnings are growing at 6%
      a year and discounted at 10% that a valuation of 25
      times after tax and 16 times pretax earnings is made.
      If anyone can confirm this please do! Thanks


      Web_Brk

    • I am considering buying some brkb shares for my
      children's college fund (16 and 18 years away still). With
      the long horizon, I am thinking that now looks like a
      good time to get in. Do you folks think I should wait
      a little bit to see if we are in the midst of a
      correction, or do you think the decline is about
      over?

      Also, I realize this has probably been discussed in
      previous posts, but I am interested to know what people
      think will happen to brk when Buffet retires or dies.
      Any input would be appreciated, even if it is just a
      referral to previous post numbers where the topic was
      discussed.

 
BRK-A
203,532.00-1,627.00(-0.79%)Aug 22 4:00 PMEDT

Trending Tickers

i
Trending Tickers features significant U.S. stocks showing the most dramatic increase in user interest in Yahoo Finance in the previous hour over historic norms. The list is limited to those equities which trade at least 100,000 shares on an average day and have a market cap of more than $300 million.