Berkshire Stock Valuation:

1) Buffett is not buying back his own stock and prefers to own short term Treasuries with the $325 billion in cash - that is all you need to know when it comes to the question whether BRK is cheap or not.

2) Buffett sold most of his Apple shares and more stocks, clearly indicating he is not happy with the valuations nor the Apple buybacks - is he predicting a crash? Possible given the 10y Treasury is creeping up and the fundamentals of governments aren't improving. Always keep in mind Buffett watches the risks over a long-term and things might not materialize tomorrow.

3) Berkshire will likely make $45 billion, a bit more, for this fiscal year - $40 billion from operations, $5 billion in hidden value creation from the remaining stocks owned, as only the dividends received are included into BRK's financial statements.

$45 billion, on the current $1 trillion market capitalization gives a PE ratio of 22. Nothing wrong with that, but historically BRK has been a much better investment when the PE ratio is closer to 10. 22 is on the higher historical average range.

Anyway, if the market crashes, BRK will likely follow in a way, and then the cash would get interesting as Buffett should deploy it when and if things get cheaper. But you can do that yourself too when you find cheaper things.

Nothing wrong with Berkshire, always a financial fortress and maybe never this strong, but I would say fairly priced for a high single digit long term return based on Berkshire's compounding. Earnings are going to continue to compound, will be at $60 billion in a few years, but if the valuation is 15 in 2029, the market capitalization will be only $900 billion. That is the only risk.

On the Buffett age question, you will keep paying your insurance, keep doing things, thus Berkshire will keep doing business, no worries there.

4 March 2024

2023 was a great year for Berkshire with $37 billion in operating earnings and another $8 in hidden earnings for a total of $45 billion and a PE ratio of 20 on the current market capitalization.

The thing is that historically the PE ratio was between 10 and 20, so now is at a higher end while even Buffett said in his letter that there is no chance for eye popping performance. Therefore, a great business with quality and business safety for sure, but you can't expect much from this level.

VIDEO ON BUFFETT's LETTER AND BRK's EARNINGS

VIDEO ON BRK's HIDDEN EARNINGS AND KEY RISK

8 Sept 2023 - Too expensive!! In good times BRK can make $40 billion of value per year! Market capitalisation is 800 billion, thus PE is 20. Yes, it is cheaper than the market, but the historical PE is between 10 and 20, so buying at 20 is simply risky!

VIDEO UPDATE (Even Warren tells you NOT TO BUY NOW)

2022 Q4 Earnings Update

Very simple:

BRK's earnings from operations over the last 12 months have been $31 billion, if I add $8 billion from the hidden earnings (BRK reports only the dividend that it gets from Apple, not the other earnings) I get to $39 billion. Q4 already shows a slowdown in earnings as at $6.7 billion it was the slowest quarter of the year.

Thus, I stick to my model where BRK's average value created for shareholders is $36 billion per year through cycles (recessions, insurance disasters etc.). With a market cap of $668 billion, the true PE ratio is around 18.55. BRK's historical PE ratio goes from 10 to 20, thus BRK is now trading on the expensive side - great business, but higher risk and lower expected reward ahead - likely around 5 to 7% per year long-term. Not bad, but not for me.

I'll keep watching and sooner or later the time will come to see BRK at a PE of 10 to average cycle earnings - that is the time to buy - it happens on average once every 12 years:-)