In a recent article, Seeking Alpha contributor David Van Knapp wrote about Berkshire Hathaway's policy of not paying dividends, while often investing in companies that do. Whenever anyone writes an article about BRK, I like to read the comment thread (the good and bad part of internet journalism), as it seems to bring out all kinds of opinions on Buffett and Berkshire. Many of the comments were quite thoughtful, with one prompting Mr. Van Knapp to reply:
As simple as that point is, it is both obvious and important, and I am interested to know what other SA readers think about it....I've always found it interesting that in his superb annual reports, Buffett gives a year-by-year history of the increase in book value of Berkshire and compares it to the S&P 500, which he beats handily over time, although of course not every year. There should be one more column in the table: Berkshire's stock price. I suspect that the reason that is not shown is that (as all Buffett fans know), the market is irrational, and it prices any stock (including Bershire) irrationally sometimes. Without having researched this, common sense suggests that there would be years that Berkshire's book value increased nicely, but its stock price did not keep pace--maybe even went down. Because Berkshire does not pay a dividend, the ONLY way a shareholder can profit from owning Bershire is via price changes, whether they are rational or not. I think the stock's price change per year should be added to that table. You can't spend book value.
Do you care about book value?
Does change in book value only mean anything if there is no intent to sell?
Would looking at a change in book value versus a change in price cause an investor to look at a potential investment (or sale) differently?
Despite his well documented goal of having shareholders who will never sell, is Mr. Buffett presenting an incomplete picture by not highlighting changes in BRK.A's stock price year-over-year?
If, as Ben Graham said, in the long-run the stock market is a weighing machine, what would be wrong about reporting changes in the stock price?
Disclosure: LONG BRK.B