Preempting Buffett’s Bears: Berkshire Hathaway Inc. (BRK.B)

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Berkshire is expensive. The “Buffett premium” will vanish when he’s gone.
Berkshire used to have a distinct “Buffett premium.” It sold at a higher price-to-book value than most of its insurance peers.

But its valuation has steadily trekked downward:

Source: S&P Capital IQ.

Berkshire currently trades for 1.35 times book value. Chubb trades for 1.4 times book. Travelers, 1.2 times book. Progressive, 2.5 times book. Whatever “premium” people refer to isn’t clear.

Buffett himself has said he’d use Berkshire’s cash to repurchase stock when it fell “demonstrably lower than intrinsic value,” which he recently targeted as anything below 1.2 times book — about where shares traded last month.

I’ll stick with his judgment. Good luck, Doug.

The article Preempting Buffett’s Bears originally appeared on Fool.com and is written by Morgan Housel.

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