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Berkshire Hathaway Inc. Message Board

  • bayposter bayposter Sep 3, 1998 1:47 PM Flag

    Is BRKA a Good Buy? A historical perspec

    From the Berkshire proxy on the merger with
    General Re
    we learn that, as of June 30, the combined
    equity of the two companies was estimated to be:

    stocks 47,751
    goodwill 17,357 //
    from General Re buyout
    other 55,092

    Liabilities (62,157)

    Sharehold Eq 58,043

    On June 30, the S&P 500 was at
    1130. Now it's at 975.
    That's a decline of 14%. So
    lets assume that the stock
    portion of assets have
    dropped by a similar amount. Also
    exclude the good
    will, since it's an artifact of the merger and
    not a
    real asset. Then we get:

    other 55,092

    Liabilities (62,157)
    Sharehold Eq

    Here's a tally of the year-end ratio of stock price to

    shareholder equity for BRKA.

    year ratio

    1981 0.95
    1982 1.02
    1983 1.28

    1984 1.08
    1985 1.50
    1986 1.36
    1987 1.19

    1988 1.58
    1989 2.02
    1990 1.45
    1992 1.52
    1993 1.89
    1994 2.06
    1996 1.79
    1997 1.80
    1998* 2.12 * as
    of June 30, 1998
    avg =

    Using the new (downward adjusted) shareholder equity

    of 33,991 from above, and the current BRKA share

    price of 61,300 the current ratio is:

    61300 /
    33,991 = 1.80

    This is still a little high by
    historical standards.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • don't forget the 18 billion in bonds which GRN currently has. Once Buffett begins reallocating the bond portfolio the future payoff will be huge, IMHO.

    • mnost informative post. but much of "other" in
      assets is, i expect, cash & bonds that we can hope and
      expect will be put to work wisely. also part of "other"
      assets are companies owned outright by brk. correct? is
      the value of these companies as listed in the proxy
      fairly accurate? it would be keeping in nature of WEB to
      underestimate these assets.

    • Reply to bayposter message 6070:

      I see a
      possible small flaw in your logic:

      1. you are
      assuming that BRK has been the same type of company

      across all the years you do this formula for.

      For example: After BRK acquires GRN aren't
      new synergies which would make BRK more valuable

      than it was before and a little bit different than

      before. ie. after the merger might
      BRK be
      considered a premium insurance company whereas
      the merger it was not. And because of this
      BRK be justified in having a higher market price

      in relation to its shareholder equity because of
      new percentage mix of companies that it

      -- Not an expert at all.

    • Lose on know it all freaks

      • 6 Replies to vontzen
      • Do you have any capital gains to absorb your
        paper loss? If so, take the gains and use the proceeds
        to buy the same number of BRK.A shares. More than a
        month later, sell your original "A" shares.

        you have no capital gains to absorb your paper loss,
        please hang on to your original "A" shares. Then, look
        back 10-15 years from now.

        I went through the
        later episode during 1987 ("A" dropped >50% intraday
        from my latest purchase price!).

        Best of luck,

      • Sorry to hear that you are down over 25%. (if you
        held on) But, let me add that we are all down 25%,
        regardless of when Brk was bought. Those who bought when Brk
        was say, $10,000 still lost over $20k per share from
        the peak. Most would counter that they are still up
        $50k, and have nothing to worry about. But this is
        simply not true.

        No doubt, through hard work,
        you saved $60,000, (probably more). But since you
        have only one life, you will never know if you could
        have saved more by making better
        career/educational/social choices earlier in life. You can only wonder
        where you would be now had you pursued a PhD or an MBA
        or even professional golf.

        Imagine yourself
        taking a different path 10 years ago. You are now a
        professional belly dancer, touring all of South America. You
        are famous and enormously wealthy.

        But because
        you did not take the belly-dancer fork in the road,
        you lost big time! An opportunity that cost you say,
        5 million. In that respect a $20k loss is chump
        change. You've already lost $4,940,000. What's another
        $20,000? (I know it doesn't feel that way though, because
        you have to make a living with what you have...
        that's why they say invest only risk

        Even Warren Buffet says his biggest mistakes are
        errors of ommission...

        If it'll make you feel any
        better, look at Greg, AKA Napart, AKA YKWTFIAM (You Know
        Who The Fuck I Am).... he down $100,000 from the
        peak... and has been mysteriously silent lately. Greg,
        You still there? :-)

      • I am tired of being called names, freaks and
        I am tired of being told that baby investors are
        supporting me.
        Please kids. Let's all respect each other.
        Warren works every day. I work every day. You work every
        day. We all invest..let's have respect.

      • No one is ever happy when the stock tanks big
        time. I know you said you got in at 84. I'm
        Since I invested a while back, this just looks like a
        real correction to me. While I don't like it, my
        percentage gain is still substantial the last couple years.

        I wish I knew how to predict the market
        turnarounds better. I would have been out day 7 of the
        turndown. All I know how to do is buy and hold just like I
        really own the company. Isn't that silly? When I did own
        a company, I held on in downturns so I could make
        money in upturns. Again, I must be silly. It did work
        without fail though...hmmmmmm..

      • I'm glad to see that you're still around! I want
        you to know
        that I bought at the same time you
        did. So far, I've seen a
        25% decline. However, what
        can you do? The entire market is
        sputtering. This
        may not mean much, but I FEEL YOUR PAIN--
        me I do.
        I'm just looking at this from the long
        perspective. In 10-15
        yrs. this should provide a much
        better return than my
        I just wanted to express some encouragement to a
        investor in the same boat.

      • Hi Vontzen, have you sold your shares?

    • ... picked up GRNs near close for $201.
      I'm think some index funds unloaded before merger when GRN is no longer in the S&P 500.

      Good luck to all.

    • Sure BRKA is a better buy now than it was when it
      was $20K higher.
      But the problem is that when it
      was $20K higher everyone was thinking of buying BRKA
      so it was "perhaps" safer to buy because of upward
      momentum (with an appropriate downside price stop).
      the problem is that everyone is selling and it's not
      at all clear when or if we've hit the bottom yet.
      Momentum is now down
      in BRKA. I would recommend
      WAITING to buy till downward momentum has clearly stopped
      and upward momentum has clearly started.

      famous quote from a very successful stock investor is as

      I never buy at the market bottom or sell
      at market top.

      My quote is that in the stock
      market bulls can make money and bears can make money but
      pigs can lose all their money.

    • Markot

      thanks for some thught versus
      babble. Check out BD board if you think you're not alone.

      "Good companies find good solutions, poor companies
      find good excuses"

      Look to Nov.1 to consider
      getting back in BRK regardless of price volatility
      between now and then.

      Let "confession" season run
      through 9/20, then actual results through 10/20 followed
      by the "wake" of 8 days for last Oct.27th, and it's
      Nov. 1st.

      Work fast then because it's only 45
      days til Tax Selling Season

    • ........why should we be surprised to find
      ourselves in our present condition? Everybody knew this was
      coming.....sooner or later. The real question I think, will be what
      WEB will do at the meeting.......whether he limits
      his remarks strictly to the merger, or if he will
      take questions on other issues/concerns of the
      stockholders.......there's where we might get insights as to our
      future..........BTW........for those who might not have heard.........the Omaha
      World Herald will be covering the event and posting it
      on ther site at safe and happy
      holiday to all........

    • ..........congratulations on your new life. Keep the faith.....bobo

    • I forgot, what is your legal situation?

      good luck anyway.

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