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  • Berkshire Hathaway market value is almost at Buyback Threshold (10% over Book value) 0 comments
    May 8, 2012 11:14 AM | about stocks: BRK.A, BRK.B

    Berkshire Hathaway generates income from Operating Earnings as well from Float.
    The book value metric that Buffett uses as proxy for intrinsic value takes both the earnings into account. Focusing only on the operating income part of the metric ignores the other half.

    This comprehensive income is detailed in the "Consolidated Statement of Comprehensive Income" on page 4 of 31Mar2012 10Q

    (click to enlarge)Shareholder Equity has increased by 11Billion to 180 Billion USDThe Comprehensive Income is 11.2 Billion.
    Income from Operations = 3.245 Billion
    Other Comprehensive Income = 7.863 Billion
    Total = 3.245 + 7.863 = 11.108 Billion.

    This explains why the equity has increased from 168 to 180 Billion USD in the last quarter. (Page 2 of the 10Q)

    Anecdotally, we know that the equity portion of the float is about 75 Billion. This 75 Billion portfolio has done well with the rest of the market in the
    first quarter of 2012.
    (click to enlarge)Comprehensive Income dwarfs Operating Income
    Berkshire Book Value is close to the buy back threshold of 10% of Book value

    The Price to Book Math is below
    Market Cap = 201 Billion
    Shareholder Equity (Book Value) = 180 Billion
    Price/Book = 1.11 = 11% over book value.
    Berkshire will buy back stock if @ 10 percent over book value. We are almost there!

    Stocks: BRK.A, BRK.B
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