Berkshire Hathaway is my biggest stock holding Its “The Security I Like Best”. A lot of people ask me what Berkshire is worth in my opinion. I say the class B shares that are trading at $3100 are easily worth $4000+ (A shares would be $120,000+). How did I come up with the number? Berkshires cash and cash equivalents holdings are valued at cash value. Berkshires equity holdings are valued at market value. Then i value individual business units based on P/E multiples given to comparable companies by the stock market.
Market Cap of Berkshire Hathaway = 145 Billion
Value of Individual Berkshire Parts = 196 Billion (Based on the Interim 2nd quarter report. Numbers used are 6 Months Net Profits *2 for full year estimate values)
- Cash and Cash Equivalents – 42 Billion
- Equity Holdings – 52 Billion
- Subsidiary Insurance companies – 4.372B * 12PE = 52.464B
- Subsidiary Utilities and Energy – .782B * 14PE = 10.948B (Pacificorp excluded)*
- Subsidiary Manufacturing , Services and Retailing – 1.864B * 16PE = 29.824B (Iscar/Russel Atheletic excluded)*
- Subsidiary Finance and Financial Products = 0.744B * 12PE = 8.928B
- Investment and Derivatives gains = 0.8B (Excluded)**
The company has a 35% discount to its actual value (I think it should have a 10% Warren Buffet premium).
Based on this valuation class B shares of Berkshire should sell for $4200 and class A shares for $126,000.
* Berkshire has just acquired PacificCorp, Iscar Metalworking and Russel Atheletic but the earnings of these companies is not part of berkshire earnings yet.
** Investment gains or losses are recognized upon the sales of investments or as otherwise required under GAAP. The timing of realized gains or losses from sales can have a material effect on periodic earnings. However, such gains or losses usually have little, if any, impact on total shareholders’ equity because most equity and fixed maturity investments are carried at fair value, with the unrealized gain or loss included as a component of accumulated other comprehensive income. – From the Report
Conflicts: I own Shares of Berkshire Hathaway