Valuation of Berkshire Hathaway - Sum of the Parts way

Here I share with you my detailed valuation of Berkshire Hathaway.

[sengjoolow]

Thank you for breaking it all down into digestible portions, in a conservative way in terms of valuation and the info on companies in related industries. learnt lots.

[kostakos]

Thanks a lot for the video - by far one of the highest quality content to be on youtube. I hope you'll do more videos soon as I've been a fan of your channel for a while and always check for new videos .

One thing to note - I believe your "value of future float" calculation may have some incorrect assumptions. The current value of float (150B or what have you) is already captured in Berkshire's other assets (companies, cash etc.) which you're counting towards the valuation. For example, BNSF is a manifestation/result of that float... in other words, BNSF IS the float (at least part of it) - so if you value float by sticking an ROI on it and after that you do a sum-of-parts with cash and railroad (etc) and value of float - you're effectively double counting.

I get that you're doing it strictly as an exercise where eventually you "pay off" the float, to get a ballpark value - in theory it may lead to the right result without being strictly correct.

I find a more correct way to value the float is to disregard the current float value (which is captured via sum of parts) and only consider the value of its future growth. For example, if float grows 3% annually, we can say next year that 150B will be 159.5B, and that net new 4.5B of float will be invested at a return of say 7.5%. So next year's net new float of 4.5B will give Berkshire 315M in returns, and you can discount it to present value... Then end of next year the float will be 150B+4.5B+315M... and it goes on. You can get every future year's net new float, along with any future compounding gain (again only gains coming from any net new future float), discount it for present value, and you have the current value of future float.

So effectively in a sum of parts you only care about capturing the value of future float. If float were to stay static from today onwards, then it has no additional value (not already captured in the cash, equity investments, wholly+partially owned businesses etc.)

[Core_Ben]

Really enjoyed this video, thank you for making it!

[liumax]

Great Analysis! thanks for reply me from Sven's channel. I learn another way to value company from their competitors as benchmark, and also how to evaluate insurance business as well. Thanks again!

[alejandrorey]

Excellent! Hope you keep on doing great value analysis like this one.

[eduandreu]

Awesome job Guille! I really enjoyed this video and learn a lot about valuation. Well done!!!

[chasericker]

You're 100% right to hold brk/b over the sp500 regardless of my criticism on your analysis. It's unbelievably undervalued. Warren an and Charlie probably peg fair value at 900 billion as of January 2022. That's why they've been unloading on buybacks. Buybacks at that valuation produce a 12-13% return which is amazing

[mariamcolladotakata]

Could you detail me what you take into account to calculate the FLOAT, in the column 4? Where is the 345, 707, etc etc

[chasericker]

The best way to do a sum of parts is the value of the businesses above book value. Your analysis on bnsf didn't include the fact they have 30 billion more assets without liabilities than union pacific. Extremely important. Your valuations are extremely conservative

[chasericker]

I like the video, but your analysis of BNSF is wrong. Union pacific is currently worth 110 billion above it's book value. Bnsf with the same margin above book would be worth 170 billion. Unp is worth less by a lot if they were both sold as a whole