Monday, November 05, 2018

Rough math on possible $100b Berkshire Hathaway share buyback


(Copy/paste from Excel, effect of even large share repurchase would be very limited? +5% intrinsic value)

Berkshire $100b Share Repurchase effect on book value per share
I believe the Berskshire Hathaway "Owner's Manual" needs to be adapted. It now says:
We regularly compare the gain in Berkshire’s per-share book value to the performance of the S&P 500. 
Over time, we hope to outpace this yardstick. Otherwise, why do our investors need us?
A share repurchase program at a price of around 1,4x book value will reduce book value per share 
whilst increasing EPS and Intrinsic Value per share
Buffett has written that Berkshire intrinsica value is the sum of investments and cash including
insurance float plus a multiple of non-insurance subsidiaries operating earnings.
Using A share equivalents
Before share repurchase After share repurchase
Price $295.000 $295.000
Book value/share $211.184 $189.423 Down 10%
Ratio 1,40 1,56
Oper. Profit excl. insurance $21.226.222.083
Oper. Profit/share $12.903 $16.252 Up 26%
   
x 13 multiple $167.739 $211.274
Inv. + cash/share $201.317 $177.002
Intrinsic Value/share $369.056 $388.277 Up  5%
Number of A share equivalents now
                1.645.061
Equity $347.401.000.000
Share Repurchase  -$100.000.000.000
Equity after $247.401.000.000
Shares bought                     338.983
Shares after                 1.306.078

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