How We Value Berkshire Hathaway
Alternative methods have some use, but we think discounted cash flow is the most fundamentally sound way to value the conglomerate, as we discuss in the final installment of our 5-part series.
Ahead of Saturday's Berkshire Hathaway (BRK.A) (BRK.B) Annual Meeting we're taking a closer look at the best way to value the complex company. We believe that understanding the benefits and shortfalls of different methodologies can provide valuable insight into the ways which different investors are approaching the firm's overall valuation.
Part 1 of the series, on an earnings-based multiple approach, is available here. Part 2 on book value can be found here. Part 3 on the two-column approach is here. Part 4 on using insurance float to value the firm is here. These approaches are useful for triangulating estimates, but are not robust enough by themselves.
Greggory Warren does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.