Thoughts on BRK and GOOG

Berkshire Hathaway

  • Semper Augustus 2017 Client letter (link) continues a annual tradition by taking a deep dive. They figure BRKB is worth somewhere around $250/share.
  • Whitney Tilson (presentation) updates his valuation to $230/share, probably rising to $250 by the end of the year.

Either way, BRK looks about 20% undervalued at current prices near $200.

Google

This is not a stock I own, but one I have looked at many times over the past 5 years hoping for a pull back. Here are two different takes:

  • Whitney Tilson (presentation) argues that we aren’t paying much of a premium over the market to own a high-class business (PE ~ 21x 2018). If we consider the optionality of YouTube and “Other Bets” then one can argue that its valuation is very reasonable.
  • Geoff Gannon, on the other hand (link), does a back of the envelope calculation on the limits to the advertizing spend. Google and Facebook capture a large (and rapidly increasing fraction) of a slowly growing pie, and will have to contend with slower growth in the future. This will result in lower multiples, and hence unspectacular returns.

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s