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    Value Investing Updated Berkshire Valuation (@ new corp tax rate)

    December 07, 2017

    Value Investing Updated Berkshire Valuation (@ new corp tax rate)

    Updated Berkshire Valuation (@ new corp tax rate)

    Posted: 06 Dec 2017 09:39 AM PST

    With Berkshire set to benefit a lot from the new corp tax rate, and a run up in the company's stock portfolio, I thought it might be interesting to revisit the valuation I posted a few months back. The stock is ~$198/share, so here's a quick breakdown of both sides of the Berkshire business: the cash and investments, and the wholly-owned operating subsidies.

    1. Value of Cash & Investments

    • $66/share stocks
    • $36/share cash (after taking out $20b for dry powder)
    • $12/share KHC (marked to market)
    • $11/share fixed income
    • $1/share Pfds/Warrants
    • less $10/share deferred tax (new rate)

    = $117/share book

    2. Value of Operating Businesses = $198 (current price) - $117 (cash & investments) = $81/share

    • 2016 Earnings operating businesses earned $8.50, so implied multiple on the operating businesses is 9.5x.
    • This seems low, and I think it deserves a higher multiple, which in and of itself would give us a ~15% discount to current prices.
    • Then factor in if you think BRK will benefit further from lower taxes not just at their operating businesses, but also with their stock holdings. AAPL, WFC, BAC, AXP in particular will benefit. And then do you think the portfolio has more room to run? Berkshire's stock portfolio trades at 19x earnings, whereas the S&P is at 25. Maybe this says more about the market's valuation than Berkshire's, but I certainly wouldn't say Berkshire's stock portfolio is overvalued.

    So let's call it $220/share - $240/share.

    submitted by /u/SlowAppreciation
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    Does anyone have Klarman's video lecture to Columbia MBAs in 2006?

    Posted: 06 Dec 2017 02:26 PM PST

    Trefis

    Posted: 06 Dec 2017 08:47 PM PST

    Anybody use this?

    submitted by /u/dutcher6
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    Horsman Capital - The Electric Vehicle Revolution (PDF)

    Posted: 06 Dec 2017 06:17 PM PST

    Talk Your Book - Thematic Idea, Short Restaurants (PDF)

    Posted: 06 Dec 2017 09:22 AM PST

    Disastrous state of European finance journalism

    Posted: 06 Dec 2017 06:48 AM PST

    Being in NYC and Boston and reading the daily financial papers I am being reminded of the utterly poor financial journalism in Europe. WSJ and Barron's do not even print papers in Europe anymore and the International edition has always been weak. The FT is a joke, do not get me started on their weekend edition. What daily / weekly papers do you read?

    submitted by /u/sjulz31
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    How do you source short ideas?

    Posted: 06 Dec 2017 06:26 AM PST

    I'm a big fan of looking at public filings of investors I respect as a source of potential long ideas.

    But this obviously can't be done for short ideas unless they publicly disclose what they're short.

    How do you guys source short ideas?

    Edit: Maybe just to add some things I look for: - acquisitive history. - high debt loads. - accounting irregularities (things like the Beneish model). - promotional management. - poors return on capital, etc.

    submitted by /u/RichReads
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