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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: James Clarke who wrote (28217)	9/24/2007 11:06:25 PM
From: Jurgis Bekepuris	Respond to of 78673

Is WSC cheaper than BRK? OK. Quick and dirty round: Yahoo numbers (not thoroughly checked but spot checked, so should OKish): BRK Market Cap (intraday)6: 180.84B Enterprise Value (25-Sep-07)3: 167.83B Trailing P/E (ttm, intraday): 14.95 Forward P/E (fye 31-Dec-08) 1: 19.30 Price/Sales (ttm): 1.62 Price/Book (mrq): 1.57 Enterprise Value/Revenue (ttm)3: 1.50 Enterprise Value/EBITDA (ttm)3: 7.9 WSC Market Cap (intraday)6: 2.77B Enterprise Value (25-Sep-07)3: 531.47M Trailing P/E (ttm, intraday): 29.05 Forward P/E (fye 31-Dec-08) 1: N/A Price/Sales (ttm): 4.63 Price/Book (mrq): 1.15 Enterprise Value/Revenue (ttm)3: 0.87 Enterprise Value/EBITDA (ttm)3: 2.848 So WSC is cheaper based on P/book, more expensive based on P/E and P/S. Unfortunately, I don't think this tells much. You know yourself that Buffett tells how lumpy BRK (and WSC?) earnings are. So I would discount P/E for BRK at least. WSC P/E and P/S are not very good though, but this is partially explained by cash on the balance sheet. WSC is even more than BRK loaded with cash: it has ~$170 per share of cash, which is almost half of the book value. This, of course, is not good for investors, since half of the book is "unproductive" earning subpar returns. BRK also has about 1/2 of book value in cash, but this is not directly comparable to WSC, since BRK also has much more liabilities, some of which are not real "liabilities" (per Buffett). Looking another way, WSC cash is ~1/2 of the assets, while BRK cash is only ~20% of the assets. If Munger/Buffett could deploy this cash somewhere, it would be great. In general, both BRK and WSC are not easy to value: there are (re)insurance operations and associated float, partial ownerships of businesses, etc. I don't even believe that comparing to historical ratios is valid, since both companies changed quite a bit in recent years. And therein lies conundrum: how to value and compare both of them? So here is where I stop for now. If you have any other metrics that would help you to decide if WSC is cheaper than BRK, I could calculate them. Just let me know. :) Any comments are welcome. P.S. Actually, looking at recent history of WSC, I am not really sure what Munger/Buffett are doing with it. If BRK is investing in PetroChina or railroads or whatever, why WSC is not doing the same? If Munger is running his own investment portfolio at WSC, shouldn't Buffett evaluate its performance and withdraw WSCs cash for subpar investment returns (like he proclaims about his other subsidiaries: if you cannot show that your cash earns certain rate of return, you don't get to deploy it). As I mentioned before, the most logical thing would be for BRK to buy the rest of WSC, pool the resources and be done with it, but I believe some non-financial factors are preventing this.

To: James Clarke who wrote (28217)	9/25/2007 10:47:13 AM
From: Kirk ©	Read Replies (1) \| Respond to of 78673

BRKA has bothered me for the WEB premium. What happens to the price of BRKA if Buffett dies? BRKA today reminds me of GE in 2000 when it still had its "Jack Welch Premium" not to mention the daily gushing on CNBC about how much money the reporters were making in the stock they could own. Also, isn't BRKA about 25% cash with negative EPS growth thus a negative PEG? I'd like my "assets" to return better than bank CDs also. Management Effectiveness Return on Assets (ttm): 4.65% Return on Equity (ttm): 11.34% Trailing P/E (ttm, intraday): 14.99 Forward P/E (fye 31-Dec-08) 1: 19.35 PEG Ratio (5 yr expected): N/A Maybe Yahoo doesn't list a 5 yr EPS growth number for some strange reason... hard to believe BRKA won't grow... Compare that to one of my larger holdings and a company I've already made about 16x on since buying it for my newsletter in 1998... LRCX Management Effectiveness Return on Assets (ttm): 21.21% Return on Equity (ttm): 43.29% Trailing P/E (ttm, intraday): 12.24 Forward P/E (fye 25-Jun-08) 1: 12.21 PEG Ratio (5 yr expected): 0.65 Here is another I've been buying for myself and the newsletter portfolio: finance.yahoo.com Trailing P/E (ttm, intraday): 19.96 Forward P/E (fye 31-Oct-08) 1: 13.47 PEG Ratio (5 yr expected): 0.79 Management Effectiveness Return on Assets (ttm): 10.38% Return on Equity (ttm): 18.48% Verigy has a similar cash/share as BRKA but far better returns with it. I think most of the value now is in technology stocks that are not in the headlines.... BRKA is mostly a perceived "value stock" and we've had about 7 years where investors have shunned growth to buy good, safe value stocks... The numbers I posted above for a few of the stocks I buy and sell for added return around a core position show why I think a rotation to growth should occur soon, it not already starting.