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Strategies & Market Trends : Buffettology
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To: Moominoid who wrote (2743)1/21/2001 1:45:35 AM
From: James Clarke  Read Replies (2) of 4690
 
My interpretation of how to value BRK has two components: 1) the stocks + operating businesses , and 2) the float. Valuing the float is fun and like no other valuation exercise I ever did. But I emerged convinced. Buffett told us how to do it in a recent shareholder letter. I'll stop there.

P/E is utterly irrelevant here - it doesn't capture the economics of either of the two components of Berkshire's valuation. I think the previous post by Jacques Newey may have told us why in a way I hadn't thought about before. Berkshire is a tax efficient value creator. You pay taxes on earnings - you don't necessarily pay taxes on increase in intrinsic value. Buffett understands the difference, and until you can (it took me four years to figure it out) this stock is nearly impossible to value.
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