Berkshire Hathaway’s Price to Book Value Ratio is at 30 Year Average

Berkshire Hathaway’s Price to Book Value Ratio is at 30 Year Average
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At Berkshire Hathaway’s closing price of $266,013 per class A share on March 1, 2017, its price to book value ratio equals 1.55 which approximates its 30 year average of 1.58.   Berkshire’s book value at year end 2016 was $172,108 per class A share.  (Berkshire’s class A shares rose $8,913 per share or 3.47% on March 1.)

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Warren Buffett has stated that he would buy back shares at prices below 120% of book value, which currently would equal prices below $206,530 per class A share.

Berkshire’s intrinsic value continues to increase relative to its book value as the percentage of total assets represented by its common stock portfolio declines.  At year end 2016, Berkshire’s investment in equity securities ($120 billion) represented only 19% of its total assets ($620 billion).  By contrast, in Berkshire’s early years, its common stock portfolio represented the overwhelming majority of its assets.

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David I Kass Clinical Associate Professor, Department of Finance Ph.D., Harvard University Robert H. Smith School of Business 4412 Van Munching Hall University of Maryland College Park, MD 20742-1815 Phone: 301-405-9683 Email: [email protected] (link sends e-mail) Dr. David Kass has published articles in corporate finance, industrial organization, and health economics. He currently teaches Advanced Financial Management and Business Finance, and is the Faculty Champion for the Accelerated Finance Fellows. Prior to joining the faculty of the Smith School in 2004, he held senior positions with the Federal Government (Federal Trade Commission, General Accounting Office, Department of Defense, and the Bureau of Economic Analysis). Dr. Kass has recently appeared on Bloomberg TV, CNBC, PBS Nightly Business Report, Maryland Public Television, Business News Network TV (Canada), Fox TV, American Public Media's Marketplace Radio, and WYPR Radio (Baltimore), and has been quoted on numerous occasions by Bloomberg News and The Wall Street Journal, where he has primarily discussed Warren Buffett and Berkshire Hathaway. He has also launched a Smith School “Warren Buffett” blog. Dr. Kass has accompanied MBA students on trips to Omaha for private meetings with Warren Buffett, and Finance Fellows to Berkshire Hathaway’s annual meetings. He is an officer of the Harvard Business School Club of Washington, DC, and is a member of the investment and budget committees of a local nonprofit organization. Dr. Kass received a Smith School “Top 15% Teaching Award” for the 2009-2010 academic year.

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