We have a lot of respect for Warren Buffett, perhaps the most successful investor of all time, exemplified by his Berkshire Hathaway Holding Company. And today the bullish rumour is BRK may be added to the S&P500 as a bellwether for the economy.
We learned a precious lot from his wide reading, preoccupation with value, perceptive pithy aphorisms and ability to go against the crowd far from the madding Wall Street crowd.
Having said that, perhaps even Mr Buffett might admit his BRK stock was overvalued at 33 times most recent fiscal year earnings and almost double tangible book value.
Of course 2009 BRK book value and earnings expectations are considerable higher than 2008, lowering anticipated Price to Book and Price to Earnings ratios, to some say the lowest in 20 years.
Over the decades, we found trailing earnings more reliable than predictions.
We note 33 times earnings is a 3% BRK earnings yield. That is overvalued relative to the recent long bond yield of 4.761%. This did not stop many others from being ebullient about Berkshire.
http://www.fool.com/investing/general/2010/01/08/americas-next-top-value-stock.aspx
BRK/A at 109,995 today is still 27% below all-time highs of 151,650 in December 2007, just as the Dow at 10,729.89 recent highs was still 24% below October 2007 highs of 14,279.96. It seems hope springs eternal despite economic evidence to the contrary.
People who missed the top can be even more bullish after the peak.
Some time ago, Mr Buffett warned his many admirers as BRK/A grew larger, his excess (alpha) Berkshire Hathaway holding company returns might decline or approach that of the market.
The affable humble modesty only increased interest in Mr Buffett and BRK/A.
JP via RSS
[...] Jubilee Prosperity » Blog Archive » Selling BRK/A below $151650 …Selling BRK/A below $151650~ Or BRK/B below $101.10. We have a lot of respect for Warren Buffett, perhaps the most successful investor of all time, exemplified by his Berkshire Hathaway Holding Company. And today the bullish rumour is … Read more [...]
Aloha All
We learned at least one person was unclear why we headlined
selling BRK/A below 151,650 or BRK/B below 101.10 when recent
prices were 109,995 and 73.43 respectively.
The long-term trend is our friend.
We like to buy on weakness in a primary uptrend or sell on strength in a primary downtrend.
With all the excitement about the 30:1 and 50:1 net 1500:1 splits, the 50:1 motivated by taxes from the BRK acquisition of BNI and the BRK KFT acquisition of Cadbury, we wish to remind folks Mr Buffett seems to be going against core declared principles promoting free markets while supporting government bailouts and guarantees that riddle them with moral hazard, calling for higher taxes while seeking to buy tax credits, eschewing stock splits while completing a 1500:1 stock split, and declaring derivatives weapons of mass financial destruction while selling naked puts that reduced the credit rating and earnings of BRK.
We think the clear long-term trend of BRK may be down, so caveat emptor…
Regards*Rich