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

To: Spekulatius who wrote (4524)	1/28/2016 10:55:21 AM
From: E_K_S	Respond to of 4691

Any idea how much is associated to Goodwill? I think you really want to look at "tanagible Book Value" rather than stated BV. If so, you would back out all the Goodwill that is carried as assets. I think that is one of the problems with the Berkshire asset value as reported by their stated BV. It may be overstated by Goodwill. That may/could be offset by their real estate holdings as they are carried based on the purchase price not the market value. As they hold their assets a very long time, these real estate assets are significantly undervalued. That may offset the overvaluation due to Goodwill. It just shows that any simple valuation approach is just an estimate so if analysts say that Berkshire is a Buy if it sells at 1.2x stated BV may/could be misleading. Maybe a better approach is to separate out his stock holdings and price those at the market value. Then look at what all his 100% owned subsidiary companies are valued at (use stated BV) and try to reduce that number by some adjustment for all the non-tangible assets (that would include Goodwill). I would not try to be too precise but rather adjust the stated BV by some percentage. Add the value of the adjusted BV and stocks held as equity then divide by the number of Berkshire shares outstanding. Another approach I might use is just calculate the Grahm Number and see where that model values BRK. I suspect it would show that the stock is not undervalued. EKS