Re-reading old post

I'm revising physics while reading Six Easy Pieces by Richard Feynman, http://www.amazon.com/Six-Easy-Pieces-Essentials-Brilliant/dp/0465023924, if only JC physics could be thought this way.

In the book, Feynman teaches very basic principle - like conservation of energy, and applied it to a wide range of phenomenon. And he also talks about how physics interact with other sciences, or even psychology, simply fascinating.

Today I was talking to an audit senior regarding accounting led incentives, e.g. book sales early if bonus tied to sales, slash much need staff cost to justify 'synergy' in acquisition, etc. Sad that the conversation didn't go anywhere, people at the table simply goes back to what the audit procedures 'should be' and no one discussed why the audit procedures was there in the first place.

Anyway, saw this MV today, very interesting

Somehow i watched this video way more times than i watch "Born this way".

I found a old post in 2008 on a friend's two favorite companies, APPLE and McDonalds.

Let's see how this two companies has performed over the last few years since the post dated Jun 2008. Chart here.

Over the last 2 year plus, Apple returned over a 100%, McDonalds over 24% and S&P a -3.84%.

Guess that buying great companies still works!

For any Buffett stalkers out there, the full transcript of his interview with CNBC is out. See here.

Berkshire Hathaway, bargain?

In the recently published annual letter and annual report, Berkshire Hathaway reported great earnings and little new news.

However, Buffett did 'help' us with the calculation of the intrinsic value of Berkshire Hathaway (BRK) stock.

In thefirst page, he said that in his estimation, the current earning power of BRK is 15 bn before tax and 12 bn after tax.

To verify this 12bn dollar figure, we can look at BRK's cashflow statement and see that operating cashflow is about 19bn and capex is about 6bn, thus 12 bn does not seem like an over-optimistic valuation.

A simple valuation would be as follow

(1) Value of operations = 12bn / 9% =133 bn

(2) Value of invested assets = 158 bn

(3) Less value of debt = 47.6 bn

Total value of Berkshire Hathaway = (1) + (2) - (3) = 243.4 bn

Number of Class A equivalent shares = 1648 k

Intrinsic value per A share = $147,694

Intrinsic value per B share = $147,694/1500 = $98.5

Current book value per A share = $95,453

Implied P/B = 1.55

Current Price per A share = $130,250

Current Price per B share = $86.7

Current BRK is trading at approximately 90% of this very conservative estimation of value.

The above calculation ignores to potential of BRK earnings substantial underwriting profit in the future, and also growth operating earnings in redeployment of it enormous cash hoard.

Thus these 'growth' would serve as further buffer against inaccuracy of the intrinsic value.

Disclosure: I'm a happy owner of Brk.B shares.