A steep 50% dip in Berkshire’s stock price occurred in 2000 when investors were chasing tech stocks to the height of the Internet bubble, creating an appealing buying opportunity for Berkshire stock. Those wishing they could travel back in time to acquire shares of the giant company can probably get a similar or even better deal in the present. The strength of the underlying business compared to its stock price (depressed slightly at 6.5% year to date) reveals a cheaper Berkshire today at $112,500 than at $41,300 in 2000. An evaluation of the fundamentals explains why this is a reasonable argument.
Price to Book
For instance, Berkshire had a total shareholders' equity of $56 billion in 2000, while today it stands at a much greater $164 billion.
The P/B ratio was 1.14 in 2010 and 1.12 in 1999. Therefore the P/B ratio is very close. The price we use for 2000 was the lowest point in 2000. For 2000 valuation, 1999 financial results were used. For current valuation, 2010 results were used.
Operating Earnings
The P/E ratio is 23.6 today and 40.3 on March 6, 2000.
Revenue
The P/S ratio was 1.37 today and 2.59 on March 6, 2000.
Total Investments (Stocks, Bonds & Cash)
Fair Value
The above calculations do indicate that Berkshire is cheaper today than it was in 2000.
Any thoughts?Also check out:
Price to Book
For instance, Berkshire had a total shareholders' equity of $56 billion in 2000, while today it stands at a much greater $164 billion.
The P/B ratio was 1.14 in 2010 and 1.12 in 1999. Therefore the P/B ratio is very close. The price we use for 2000 was the lowest point in 2000. For 2000 valuation, 1999 financial results were used. For current valuation, 2010 results were used.
| Fiscal Year | Equity | Market Cap ($B) | P/B |
| 2011 | 164 | 187 | 1.14 |
| 2000 | 56 | 62.8 | 1.12 |
Operating Earnings
The P/E ratio is 23.6 today and 40.3 on March 6, 2000.
| Earnings ($B) | Market Cap ($B) | P/E | |
| 2011 | 7.928 | 187 | 23.6 |
| 2000 | 1.557 | 62.8 | 40.3 |
Revenue
The P/S ratio was 1.37 today and 2.59 on March 6, 2000.
| Revenue ($B) | Market Cap ($B) | P/S | |
| 2011 | 136 | 187 | 1.37 |
| 2000 | 24.208 | 62.8 | 2.59 |
Total Investments (Stocks, Bonds & Cash)
| Total Investment ($B) | |
| 2011 | 147.6 |
| 2000 | 73.35 |
The above calculations do indicate that Berkshire is cheaper today than it was in 2000.
Any thoughts?Also check out:
