Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial) is trading near book value, which Warren Buffett (Trades, Portfolio) believes greatly underestimates fair market values. Berkshire is the 800-pound gorilla in insurance. Market participants perceive Covid-19 claims may bankrupt insurers. There will be significant costs and hits to portfolio companies. But, most insurance policies exclude pandemics and premiums are rising faster than risks. Meanwhile, Berkshire continues to invest no-cost insurance “float” in guaranteed cost-plus utilities and other critical enterprises. This makes sense when the Federal Reserve pays 0.25% and European Central Bank charges 0.50% to hold bank cash.
From Bruce Berkowitz (Trades, Portfolio)'s Fairholme Fund (Trades, Portfolio) 2020 semiannual shareholder letter.
