Episode summary
Is Berkshire Hathaway Undervalued Right Now? (Chris Bloomstran Explains) (TIP810)
We Study Billionaires
· · Hosts: Stig Brodersen · Guests: Chris Bloomstran
Summary
Chris Bloomstran argues Berkshire Hathaway is still worth more than the market price, but not by a huge margin. Using four valuation methods, he estimates intrinsic value growth of 9.3% year over year, implying a fair value of about $1.25 trillion and roughly $570 per B share. At the time of the discussion, he says the stock was trading at about 85% of fair value, which is close enough that Berkshire’s renewed repurchases made sense after the post-earnings selloff.
He spends much of the conversation explaining why Berkshire’s reported operating earnings can be misleading. Bloomstran adjusts for currency translation on Berkshire’s yen debt, reserve development in insurance, and goodwill write-downs in the operating businesses. He says the railroad, energy, and manufacturing, service and retail businesses all grew, while the headline decline in operating earnings masked a better economic picture.
Bloomstran is positive on Greg Abel’s first shareholder letter, calling it disciplined, business-focused, and culturally aligned with Berkshire. He also defends Abel’s $25 million compensation as appropriate for the role, while arguing that Berkshire’s real governance advantage is integrity and ownership alignment rather than elaborate incentive schemes.
Key takeaways
- Bloomstran estimates Berkshire’s intrinsic value at about $1.25 trillion, or roughly $570 per B share, and says the stock was trading at about 85% of fair value.
- He says Berkshire’s headline operating earnings decline was overstated because currency effects, reserve development, and goodwill write-downs distorted the numbers.
- Bloomstran thinks the core businesses he tracks—railroad, energy, and manufacturing, service and retail—were all up year over year and remain the key drivers of value.
- He calls Greg Abel’s first letter good and says it showed he understands Berkshire’s culture, conservatism, and capital allocation priorities.
- He supports Abel’s $25 million compensation and argues Berkshire’s real control mechanism is integrity and ownership, not stock-based pay.
- Bloomstran expects Berkshire’s long-run intrinsic value growth to run around 10% to 12%, not the 28% compounding of the Buffett era.
Notable quotes
“9.3% growth in intrinsic value is kind of in line with what I would expect annually, on average for the next 10 or 15 years”
“the stock's trading at about $0.85 on the dollar a fair value”
“I thought it was good. Yeah. First time writing. He's not going to be as funny ever as Warren”
“High prices mixed with high margins are typically a recipe for bulk returns or worse”
How the episode opens
00:00:00:00 - 00:00:29:05 Unknown 9.3% growth in intrinsic value is kind of in line with what I would expect annually, on average for the next 10 or 15 years, and that would be between 10 and 12%, which is what it's been for the last quarter century. The days of compounding it, 28% a year are gone. But I think if you look at the moving parts of Berkshire, the key moving parts, they can grow the earning power of the business by 10 to 12%.
00:00:29:07 - 00:00:49:17 Unknown Welcome to the investor's podcast. I'm your host, Stig Brodersen, and I'm here with Chris Brown strand. And this episode has been published the week we get before the Big One.
And of course, we're talking about the books at Hathaway annual shareholders meeting. Chris, welcome to the show. Well, I think we're making this an annual tradition, but always fun to catch up and look forward to the conversation.
00:00:49:17 - 00:01:08:23 Unknown Thanks for having me. You bet. Chris.
I was going through some of our older conversations. I think this might be the sixth time you're you're on and it's always around this special time of the year. So we have this window after your wonderful, wonderful letter has been published.
But then just before Berkshire. And so this is it. This is the pre-game banter.
00:01:09:05 - 00:01:29:03 Unknown Chris, are you excited about the weekend? I am, it's my favorite week of the year. My favorite used to be two days, used to blend on Friday and back on Sunday.
And and my little group of friends. We have a glass of Burgundy and have a steak dinner. Go to the meeting, get up early, go to the meeting, repeat the Burgundy and steak dinner, and then go home.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- berkshire hathaway valuation
- intrinsic value returns
- berkshire management compensation
- openai valuation
- s&p 500 buybacks
Companies and tickers mentioned
- BRK-B
- BRK-A
- Berkshire Hathaway
- Semper Augustus
- OpenAI
Watch the episode
Watch “Is Berkshire Hathaway Undervalued Right Now? (Chris Bloomstran Explains) (TIP810)” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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