The answer may not be what you want to hear/read. A Corporate pumptard (someone in the C-suite that buys his company's stock on the quiet and then promotes it to drive the price up) could end up receiving a slap on the wrist, and very likely, a fine from the SEC, neither of which would be a positive for the stock price in the long run.
OMG, hjc, you really are fixated on that CEO. Does a day every go by that you don't ponder the mysteries of Ginni? What is it about her that fascinates you so much? Her blue eyes? Her blond hair? Her smile? The fact that your idol is mesmerized by her?
Now for the cloud. I've given up trying to understand the cloud, along with Wi-Fi, bluetooth, and stop start technology (I hope I never have to buy another new car, the auxiliary battery in my son's new car died about 18 months after purchase.). Those newfangled geegaws are strictly for young whippersnappers.
And BTW, it's Ginni, not Ginny: Virginia Marie "Ginni" Rometty.
« Y aren't there any bulls brkb on the brkb board ? »
 - BRK currently trades (at 138% of most recently reported book value per share) for way more (a 15% premium) to what WEB would pay for it (120%) and when he passes on, support, if any, is likely to be 120% (or less).
 - No one, other than WEB (110% is equivalent to buying a dollar bill for ninety cents, implying that IV might be 122%) can offer a CREDIBLE, HONEST, estimate of what IV might be, so references to "material discount to IV" is nothing more than a joke. Higher guesstimates appear to be feeble attempts by pumptards to line up some sheepies for shearing.
 - No dividend (for at least for the next 10 to 20 years, if ever) equals no interest (in BRK as an investment), and also means that mere mortals have no credible way of guesstimating what a hypothetical stream of future dividends might be, discounting them, and forming their own opinion (at best, a wild guess) as to what IV might be.
 - There are way too many, easier to value, alternatives that pay at least as well, if not better, with less risk, so why bother with BRK (other than for the bragging rights to: "The World's Greatest Investor is running my money")?
Just my opinion.
What does the phrase: "a material discount to IV" mean?
A "I don't know" discount to a "I don't know" price?
Two too many weasel words, in my opinion.
OK, hjc, so when WEB made the very first offer, apparently he WAS offering to buyback the stock (at 110% of BV) which was a material (10%) discount to IV (122% of BV). Now, do you consider buying dollar bills for ninety cents to be a material discount? A discount? Yes. Material? Not in my book. At what point does a discount become material: 5%, 10%, 15%, 20%, 25%, ..., ?
« Fortune 10/4/2011 Warren Buffett at Fortune's Most Powerful Women Summit »
"And I use this figure of 110 percent of book as being the limit because I know that that price is demonstrably less than the businesses are worth."
"If I can buy dollar bills for 90 cents, I’ll buy them. I want to warn the people that are selling to me that I believe I am buying their dollar bills for 90 cents because they’re our partner."
110% / 90% = 122%
No doubt about it, the market is definitely getting kind of goofy.
Year to date, cumulative total returns (12/31/2015 to 4/1/2016)
Stuff I watch but don't own:
2.06% VOO (Vanguard's "500" ETF)
12.37% SPHD (high dividend / low volatility ETF)
Then there's my pathetic holdings:
2.06% VPGDX (Vanguard's managed payout fund, goal: pay 4% grow both the distribution & principal by inflation)
15.80% VPU (Vanguard's Utilities ETF)
Double digit returns in three months? Ridiculous!
I get about 33 shares of IBM per 1,000 "BRK-B" shares.
Be sure to check my arithmetic.
According to the 2015 annual report, at year end BRK owned:
81.033450 million shares of IBM (page 20)
1.643393 million equivalent Class "A" shares (page 65) which is equal to 2,465.0895 million equivalent Class "B' shares.
81.033450 / 2465.0895 X 1,000 = ~33 IBM shares per thousand BRK-B shares.
Just a reminder, IBM will probable announce and raise the dividend (from $1.30, to $1.40 ... $1.45) on Tuesday, April 26.
IMO, Market Cap is a goofy, nonsense number. It is what the market believes the equity in a company is worth at some particular point in time, i.e., the current price times the current number of shares. IMO, what you're pointing out is that the market liked IBM a lot more shortly (about three quarters) after WEB bought it than they do now.
You're way too high!
IMO, the most BRK could have paid (a special, one time only, dividend, paid from cash net of insurance reserves) is about $16.71 per "B" share and even that is no no longer possible, since some of that cash is now earmarked to pay for the PCP deal.
WEB has specifically stated that there will be no dividends for at least the next 10 to 20 years, if ever!
Go back and reread page #36 of the 2014 (not the 2015) annual report.
"Eventually – probably between ten and twenty years from now – Berkshire’s earnings and capital resources will reach a level that will not allow management to intelligently reinvest all of the company’s earnings. At that time our directors will need to determine whether the best method to distribute the excess earnings is through dividends, share repurchases or both. If Berkshire shares are selling below intrinsic business value, massive repurchases will almost certainly be the best choice."
I know I'm asking a lot here, but think for a moment, just a moment.
$283,000 per "A" share is 182% of Book Value per "A" share.
If you told Buffett you thought BRK was worth 182% x BV my guess is he would probably laugh at you.
Did you clowns even bother to read his letters & annual reports?
From page #34 of the 2014 (not the current, 2015) Annual Report:
"If an investor’s entry point into Berkshire stock is unusually high – at a price, say, approaching double book value, which Berkshire shares have occasionally reached – it may well be many years before the investor can realize a profit. In other words, a sound investment can morph into a rash speculation if it is bought at an elevated price. Berkshire is not exempt from this truth.
Purchases of Berkshire that investors make at a price modestly above the level at which the company would repurchase its shares, however, should produce gains within a reasonable period of time."
In this game of "Carnies vs Rubes", my sympathies are with the rubes. If the carnies get excessively greedy and begin to promote multiples that even WEB himself would not approve of, I'm going to call them on it. And if I have to call them clowns to get their attention, then I will. You can be forgiven if you slept thorough 2007 --- 2013. A quick recap. The carnies had a real field day pumping the price in the later half of 2007 and the very tool they are talking today, "the Page 4, 2 column method" was their weapon of choice. I did fight them, but threw in the towel in the fourth quarter, and went silent. By 12/12/2007 they had pumped the P/BV to 1.94 and I sold at the open, $5,020 per "B", a split adjusted $100.40. It would take slightly more than five years for the poor hapless soul who bought my shares to break even, BRK-B closed at $101.02 on 2/19/2013, 1896 days later. Do you really want a repeat of that? My guess is WEB doesn't, hence his valuation "hints", which the clowns conveniently choose to ignore.
My curious is piqued. Your screen name, which implies some sort of relationship with Yorkshire, England, and your need for proper etiquette, suggests that you might be a misplaced Brit, my guess is Canadian. Care to confirm or deny?
IBM pays a dividend, has a dividend policy: our goal is to return 75% to 85% of free cash flow (in dividends & share repurchases) to shareholders, and is therefore relatively easy to value.
BRK, on the other hand, has no intention of paying a dividend any time in the next 10 to 20 years (if ever) and is therefore very difficult to value, which makes it an ideal vehicle for folks looking to run a pump & dump.
I'm still puzzling over the semantics of:
« What it's worth and where you should buy aren't the same things. »
« What price do you endeavor to pay? »
I would pay IV, but then I use realistic assumptions to arrive at the number.
Why don't you review WEB's 1991 worked example.
« Chairman's Letter - 1991 - Berkshire Hathaway »
Then scroll down to: "A Change in Media Economics and Some Valuation Math",
and then scroll down to the paragraph that starts: "The industry's weakened franchise has an impact on its value that goes far beyond the immediate effect on earnings. For an understanding of this phenomenon, let's look at some much over-simplified, but relevant, math."
Note that he is using a credible (for the time), 6% nominal growth rate, a 10% nominal discount rate, and even though he can't bring himself to use the word DIVIDEND, he all but says it, in his awkwardly contorted, convoluted, but otherwise precise, definition of "freely-distributable earnings".
So he's valuing the business using a price to dividend ratio of 25.
One last historical example before I give up on this thread.
If you bought the S&P 500 on 3/31/2000, and pocketed, rather than reinvested the dividends, and then sold it on 3/31/2016, what would you have made?
Your return, XIRR, over that 16 year period would have been 3.45%,
Why so little?
You paid too much on 3/31/2000.
The Price to trailing twelve month Dividend ratio was a ridiculously high 89.4 ($1,498.58 / $16.76).
And why was it so high?
Pumptards had driven the price and the P/D ratio up over the preceding eight years. In just 8 years the pumptards had managed to eat your breakfast, lunch and supper, for the next 16 years.
For the sake of completeness, at the close, on 3/31/2016, the P/D was 46.9 ($2,059.74 / $43.88). Which is still too high!
Now, what should you have paid on 3/31/2000?
Assuming that you wanted a 10% return on your investment, and that dividends would grow on average 6% per year, what was the INTRINSIC VALUE of the S&P 500 on 3/31/2000?
IV = D / ( r -g ) = $16.76 / (10% - 6% ) = $419.00.
That's an IV/D of 25.
If I substitute $419.00 for $1,498.58 on 3/31/2000 and recalculate the XIRR, I get 13.50%, which is too high for a reason, the terminal P/D is still too high.
If I set both the initial price and the final price to 25 times the actual TTM D/s, I get an XIRR of 10.05%.
And that is, in my opinion, how you calculate IV, and use it in a buying decision.
Thank you for sharing your thoughts. I did respond to you earlier today, but apparently the post was pulled.