BRK-B

eastbay · #1 04-21-2006, 10:57 AM

Still a good "no brainer" place to stash money and forget about it for awhile?

eastbay

KingNeo · #2 04-21-2006, 02:42 PM

I think it is still a good place to stick about 10-20% of your portfolio. I mean it is basically a mutual fund now considering what they own. And for the present time it is being managed by probably the best investor ever. Not sure how much longer he is going to be around, but for now it is solid.

BRK-B just pulled back some within the past 2 weeks so now would be a decent time to grab some shares.

buffett · #3 04-21-2006, 04:03 PM

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Still a good "no brainer" place to stash money and forget about it for awhile?

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BRK-B just pulled back some within the past 2 weeks so now would be a decent time to grab some shares.

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My response to both of the above quotes is: depends on the intrinsic value.

DesertCat · #4 04-21-2006, 04:45 PM

My guess at IV is around $108,000 for the A shares, which works out to $3,600 for B shares. This estimate comes from WEB's two numbers quoted in the recent annual report, insurance co. assets + 20x after tax income for operating companies. Let me know if anyone wants a fuller explanation of this.

Right now it's getting fairly attractive, but I haven't bought any because I feel I have higher returns elsewhere. I did some estimates where it's price usually bottoms around 68-75% of year end IV (using that same formula) the last decade. So if year end IV ends up at $120k, then $84k would be that level.

The problem with the nice discount to IV we have now is that you can't expect Buffett to increase IV much more than 10-15% per year. So if it continues to trade at a similar discount, that will effectively be your return. You could "trade" it, selling when it approaches IV, but I have no idea when that might happen. By the same formula price to IV has been as high as 150% in the last 10 years, but it hasn't been over 100% for the last 2 years. The mindless Buffett frenzy might be over and it might never trade up over IV again.

But if I were a passive investor with a long term outlook I'd probably buy here. You also may have downside protection. If WEB dies, I think his estate requirements will force an annual dividend of at least $3k (5% of bok), which would be almost 4% at todays price.