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.
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