Wednesday, March 1, 2023

Updated estimate of Berkshire Hathaway's intrinsic value; 25 cool charts on great growth stocks; My first TV interview about Ukraine: U.S. Humanitarian Reflects on Year of War in Ukraine

By Whitney Tilson

1) In Monday's and yesterday's e-mails, I analyzed the annual letter from Berkshire Hathaway (BRK-B) CEO Warren Buffett and the company's fourth-quarter earnings.

Today, I'd like to update my estimate of Berkshire's intrinsic value using the methodology that I've used – and that I think Buffett himself uses – to value Berkshire for more than two decades.

Take cash and investments (valued at market) and add the value of the wholly owned operating businesses, calculated by applying a conservative multiple (I use 11 times) to the pretax earnings of those businesses.

This table shows how I calculate Berkshire's investments per share as of the end of 2022:

Adjusting the $309 billion stock portfolio at year end upward by the 3.6% increase in the S&P 500 this year increases investments per share from $335,000 to $348,000 currently.

To value the wholly owned businesses, here are the figures I use to calculate their earnings:

Note that I subtract all of the underwriting and investment profits from Berkshire's massive insurance operations but add back a rough estimate of the average insurance underwriting profits over the past decade ($1.4 billion annually).

This results in $19,456 in adjusted pretax earnings per share in 2022, to which I apply a multiple of 11 times to arrive at a value for the operating businesses of $214,000 per share.

Now add the $348,000 in cash and investments per share to arrive at a total intrinsic value of $562,000 per A-share (or $375 per B-share).

With the A-shares closing yesterday at $463,525, that means the stock is trading 18% below my estimate of its intrinsic value.

In summary, Berkshire is incredibly safe, growing at a healthy rate, and its stock is cheap. Since the market's recovery after the COVID crash, Berkshire has traded at a 0% to 20% discount, so today it's near the high end of that range – making this an excellent time to own the stock.

2) A website called Quartr creates wonderful charts and visuals...

I linked to 25 company-specific ones in my January 23 e-mail, including favorites on Berkshire, Apple (AAPL), AutoZone (AZO), Monster Beverage (MNST), Tesla (TSLA), Disney (DIS), and Netflix (NFLX).

Quartr has just posted another 25 on its Twitter feed, featuring charts on some incredible growth companies such as Fair Isaac (FICO), Brown-Forman (BF-B), Texas Instruments (TXN), Hermès, Copart (CPRT), and L'Oréal. Below are the two on Fair Isaac and Brown-Forman:

3) I did my first TV appearance about my Ukraine mission on Friday, the one-year anniversary of the invasion, with WGN in Chicago.

I thought the five-minute interview went well despite the poor-quality video – I was at a friend's house for dinner, so I had to do it from his closet!

You can watch it here:

Best regards,


P.S. I welcome your feedback at [email protected].