Kase Capital’s Whitney Tilson sees a 40% upside in Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B). Below are the excerpts from his presentation. Also see: Whitney Tilson: Berkshire Hathaway Has 30 Percent Upside

Berkshire Hathaway: The Basics

  • Stock price (5/6/14): $187,375

–$124.67 for B shares

  • Shares outstanding: 1.64 million
  • Market cap: $308 billion
  • Total assets (Q1 ’14): $495 billion
  • Total equity (Q1 ’14): $230 billion
  • Book value per share (Q1 ’14): $138,426
  • P/B: 1.35x
  • Float (Q1 ’14): $78 billion
  • Revenues: (TTM Q1 ’14): $184 billion
  • Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) today is the 16th largest company in the world (and 4th largest in the U.S.) by revenues

Berkshire Hathaway: History

  • Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) today does not resemble the company that Buffett bought into during the 1960s
  • It was a leading New England-based textile company, with investment appeal as a classic Ben Graham-style “net-net”
  • Buffett took control of Berkshire on May 10, 1965
  • At that time, the company had a market value of about $18 million and shareholder’s equity of about $22 million

Business Mix By 2012 Total Revenue

Berkshire hathaway Business Mix By 2012 Total Revenue

Berkshire Hathaway’s Culture Is Powerful and Unique: “A Seamless Web of Deserved Trust”

  • Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) operates via extreme decentralization: though it is one of the largest businesses in the world with approximately 330,000 employees, only 25 of them are at headquarters in Omaha

–There is no general counsel or human resources department

  • “By the standards of the rest of the world, we overtrust. So far it has worked very well for us. Some would see it as weakness.” – Charlie Munger, 5/14
  • “A lot of people think if you just had more process and more compliance — checks and double-checks and so forth — you could create a better result in the world. Well, Berkshire has had practically no process. We had hardly any internal auditing until they forced it on us. We just try to operate in a seamless web of deserved trust and be careful whom we trust.” – Munger, 5/07
  • “We will have a problem of some sort at some time…300,000 people are not all going to behave properly all the time.” – Warren Buffett, 5/14
  • “Behavioral scientists and psychologists have long contended that ‘trust’ is, to some degree, one of the most powerful forces within organizations. Mr. Munger and Mr. Buffett argue that with the right basic controls, finding trustworthy managers and giving them an enormous amount of leeway creates more value than if they are forced to constantly look over their shoulders at human resources departments and lawyers monitoring their every move.” – NY Times, 5/5/14

See full presentation on Whitney Tilson Updates His Berkshire Hathaway Slides; Sees 40% Upside

Via Tilson Funds

Whitney Tilson Updates His Berkshire Hathaway Slides; Sees 40% Upside