💵The current price to book ratio for Berkshire Hathaway as of July 08, 2022 is 1.19💵 | LUMN Message Board Posts


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Msg  181040 of 182325  at  7/9/2022 8:10:28 AM  by

CTL3

The following message was updated on 7/9/2022 8:13:19 AM.

💵The current price to book ratio for Berkshire Hathaway as of July 08, 2022 is 1.19💵

https://www.macrotrends.net/stocks/charts/BRK.B/berkshire-hathaway/price-book


💰Berkshires intrinsic value far exceeds its book value💰
To the Shareholders of Berkshire Hathaway Inc.:

Berkshires gain in net worth during 2015 was $15.4 billion, which increased the per-share book value of both our Class A and Class B stock by 6.4%. Over the last 51 years (that is, since present management took over), per-share book value has grown from $19 to $155,501, a rate of 19.2% compounded annually.*

During the first half of those years, Berkshires net worth was roughly equal to the number that really counts: the intrinsic value of the business. The similarity of the two figures existed then because most of our resources were deployed in marketable securities that were regularly revalued to their quoted prices (less the tax that would be incurred if they were to be sold). In Wall Street parlance, our balance sheet was then in very large part marked to market.

By the early 1990s, however, our focus had changed to the outright ownership of businesses, a shift that diminished the relevance of balance-sheet figures. That disconnect occurred because the accounting rules that apply to controlled companies are materially different from those used in valuing marketable securities. The carrying value of the losers we own is written down, but winners are never revalued upwards.

Weve had experience with both outcomes: Ive made some dumb purchases, and the amount I paid for the economic goodwill of those companies was later written off, a move that reduced Berkshires book value. Weve also had some winners a few of them very big but have not written those up by a penny.

Over time, this asymmetrical accounting treatment (with which we agree) necessarily widens the gap between intrinsic value and book value. Today, the large and growing unrecorded gains at our winners make it clear that Berkshires intrinsic value far exceeds its book value. Thats why we would be delighted to repurchase our shares should they sell as low as 120% of book value. At that level, purchases would instantly and meaningfully increase per-share intrinsic value for Berkshires continuing shareholders.

The unrecorded increase in the value of our owned businesses explains why Berkshires aggregate market- value gain tabulated on the facing page materially exceeds our book-value gain. The two indicators vary erratically over short periods. Last year, for example, book-value performance was superior. Over time, however, market-value gains should continue their historical tendency to exceed gains in book value.

https://www.berkshirehathaway.com/letters/2015ltr.pdf


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