Preview

Warren Buffet

Better Essays
Open Document
Open Document
736 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Warren Buffet
Warren E. Buffet

Analysis: 1 What is the possible meaning of the changes in stock price for Berkshire Hathaway and Scottish Power plc on the day of the acquisition announcement? Specifically, what does the $2.17 billion gain in Berkshire’s market value of equity imply about the intrinsic value of PacificCorp?

2 Based on the multiples for comparable regulated utilities, what is the range of possible values for PacifiCorp? (I am looking for numbers, but they are given in the case).

3 Assess Berkshire’s bid for PacifiCorp. Does it make sense given your answer to #2? Hint: How was has Berkshire Hathaway performed in the aggregate? What about some of its specific investments such as MidAmerican Energy Holdings? Hint: Computations will help to support your answers here

4. How has Berkshire Hathaway performed in the aggregate? According to information divulged in the Berkshire Hathaway 2012 Annual Meeting Notes, in general, all of Berkshire’s companies, with the exception of the residential construction companies had shown good earnings growth in the first quarter of 2011. Each of Berkshire’s five largest non-insurance companies Burlington Northern Santa FE (BNSF), Iscar, Lubrizol, Marmon Group and MidAmerican Energy delivered record operating earnings in 2011 of more than $9 billion in aggregate. Unless the economy weakens in 2012, Buffett expects each of the “fabulous five” to once again set a record, with aggregate earnings comfortably topping $10 billion. In the first quarter 10-Q insurance section, Berkshire disclosed how an accounting change for GEICO on deferred policy acquisition costs resulted in a decline in earnings of $250 million although there was no impact on cash flow. GEICO had a terrific first quarter as float grew and the underlying business was better than presented. Buffett feels good about the first quarter and the year.

What about some of Berkshire Hathaway’s specific investments such as MidAmerican Energy

You May Also Find These Documents Helpful

  • Good Essays

    Hsbr Ibm Case

    • 1876 Words
    • 8 Pages

    In the seven years (since 1994), that Lou Gerstner has reigned over IBM, the company’s earnings per share have increased an average of 27% per year. This remarkable increase in earnings, has not gone unnoticed by the securities markets. Indeed, the company’s market value has grown from less than $30 billion to over $200 billion during this period. Use the following financial statement data to: 1. Decompose IBM’s ROE and discuss the factors (and trends) that contribute to Big Blue’s profitability 2. Evaluate IBM’s Revenue growth, Receivables, and Gross margins and over the period (be sure to control for seasonality in your evaluation) 3. Evaluate IBM’s Earnings per Share (basic), and Identify the factors most responsible for the increase in IBM’s earnings Write your answers in standard English. Be specific in your references, provide details of your computations, and be thorough in your explanations – I cannot read your mind.…

    • 1876 Words
    • 8 Pages
    Good Essays
  • Powerful Essays

    Berkshire Hathaway

    • 1864 Words
    • 7 Pages

    Warren Buffet invoked the substance-over-form concept to justify accounting for the GEICO and General Foods transactions as dividends distributions rather than sales of stock. Do you agree with Buffet that the substance of each of the proportionate redemptions was a dividend and not a sale of stock?…

    • 1864 Words
    • 7 Pages
    Powerful Essays
  • Powerful Essays

    For every one dollar of shareholder equity is supporting only one dollar of reserves and about half a dollar of insurance premiums. This shows that Berkshire is overcapitalized to a significant degree and that it is operated with extraordinarily low leverage levels. This is somewhat mitigated with a more aggressive allocation towards equities with the entire shareholder capital allocated to that segment. Overall the balance sheet shows low risk with an ability to support larger insurance business. Insurance Leverage Equities/ Reserves/ Statutory Statutory Surplus Surplus 0.8 1.1 1.0 1.3 0.9 0.8 0.9 1.0 1.1 0.9 0.9 1.1 0.9 0.8 0.9 0.9 1.1 1.5 1.5…

    • 4577 Words
    • 19 Pages
    Powerful Essays
  • Good Essays

    What is the possible meaning of the changes in stock price for Berkshire Hathaway and Scottish Power plc on the day of the acquisition announcement? Specifically, what does the $2.55 billion gain in Berkshire’s market value of equity imply about the intrinsic value of PacifiCorp?…

    • 1544 Words
    • 7 Pages
    Good Essays
  • Powerful Essays

    AAHamlen2e TB Ch01 031512

    • 6547 Words
    • 63 Pages

    Use the following information on a company’s investments in equity securities to answer questions 1- 4 below.…

    • 6547 Words
    • 63 Pages
    Powerful Essays
  • Good Essays

    The first mistake made by the people was that they thought they could stuff Ben Franklin’s in their pockets and life would be a success. The reason people thought they could bulk up their pockets because they could buy stocks. People buy stocks because they want their money to grow over time. That way they could use it for savings and in case everything went south on them they were ready. Warren Buffet started as a poor man living in the slums. He owned some of the most successful stocks in the world. He is one of the few to learn from his father mistakes and succeed. That is an example of knowing what you are going to get instead of grinding your teeth waiting for Santa to arrive. The people back then thought. there is no risk, and things…

    • 545 Words
    • 3 Pages
    Good Essays
  • Satisfactory Essays

    | |Cost of goods available for sale |$460,900 | | | |$451,800 | | |…

    • 292 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    It was pretty obvious that at 79, Mr. Warren Buffett age does not affect the company’s strategic moves such as the purchase of Burlington Northern Santa Fe Railroad. This was a wise move for Mr. Buffett, which took a lot of research, and time, and knowing when to make an offer for BNSF, and what to offer. I feel that with age comes experience, and Mr. Buffet saw an opportunity and took it. BNSF was a solid investment, with real profit, cash flow and a very good future. Mr. Berkshire Hathaway’s business model was to buy large insurance companies that ensured a stabilized cash-float, but the purchase of BNSF may have seemed to differ from his usual business model, but the outcome was the same, with having a stabilized cash-float. With the oil boom and increase in agriculture, and industrial shipments, this made BNSF a perfect financial asset for Mr. Berkshire Hathaway.…

    • 557 Words
    • 3 Pages
    Satisfactory Essays
  • Good Essays

    Another way in which Buffet proved to be a great leader was by the way he communicated. In his letter at the start of Berkshire’s annual reports, he is able to simplify the technical details so that all his shareholders can understand the business in which they are invested (Madston Black, 2012), a sure sign he really understands the businesses he owns. Through his easy-to-understand explanations, we are able to get a glimpse into the mind of the one of the world’s most successful investors.…

    • 1410 Words
    • 6 Pages
    Good Essays
  • Powerful Essays

    Leadership Warren Buffet

    • 1933 Words
    • 8 Pages

    He is known for his "value investing" and is the most famous disciple of value investing inventor Benjamin Graham. A simple, honest man with grandfatherly looks, Buffett is considered an intellectual genius who makes rapid decisions and decides on a major purchase with just a few days of research. Today, Warren Buffett the chairman and CEO of Berkshire Hathaway is unquestionably the most successful investor of our times. For the last four decades, Warren Buffett's annual letters to shareholders are a very valuable source in understanding his investment style and outlook about economy.…

    • 1933 Words
    • 8 Pages
    Powerful Essays
  • Better Essays

    Warren Buffet Case

    • 2168 Words
    • 9 Pages

    Specifically, what does the $718 million gain in Berkshire’s market value of equity imply about the intrinsic value of GEICO?…

    • 2168 Words
    • 9 Pages
    Better Essays
  • Good Essays

    Bill Gates

    • 748 Words
    • 3 Pages

    When you look back at the career of Bill Gates, it's easy to focus on Microsoft's biggest product –…

    • 748 Words
    • 3 Pages
    Good Essays
  • Satisfactory Essays

    Bill Gates

    • 337 Words
    • 2 Pages

    I want to say about William Henry Gates, also known as «Bill Gates». He is the youngest self made billionaire and may be the best businessman in the world. Bill Gates is important not only because he changes the computer technology in America, but also created the biggest, richest and the most powerful company in the world.…

    • 337 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Berkshire

    • 765 Words
    • 2 Pages

    As many investors now say, it is getting harder to find value in choosing stocks and acquiring companies particularly successful ones. This is why in 2001 Warren Buffet said “We need elephants to make significant gains now-and they are hard to find” This is very similar to today’s valuations of companies that are now back to all-time highs so it is more difficult to find intrinsic value in a company. As Mr. Buffet many times has said there needs to be intricsic value when investing which he defines as the present value of future expected performance. This is one of the reasons Berkshire Hathaway saw a $2.55 billion gain in their market value the day of acquiring PacifiCorp. Many times you see the firm buying out the company especially when paying a premium go down the day they acquire a company. However, investors did their own calculation and valued PacifiCorp at much higher than the $5.1 billion purchase price and looked at the Duke Enegy deal to acquire Cinergy for $9 billion. Another reason Berkshire’s market capitalization appreciated over $2 billion was simply because investors value Mr. Buffets investments and know he doesn’t typically acquire a company unless there will be long-term consistent growth. He has had many losing investments but he is one of the richest people in the world because he sees value where others don’t.…

    • 765 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    Bernard Madoff

    • 794 Words
    • 4 Pages

    Madoff graduated in 1960 with a Bachelor of Arts in Political Science from Hofstra University. He then went on to attend Brooklyn Law School, but quickly dropped out after he founded his firm, Bernard L. Madoff Investment Securities (BLMIS).…

    • 794 Words
    • 4 Pages
    Good Essays

Related Topics