Paying Over 20x Earnings

Paying Over 20x Earnings

Paying Over 20x Earnings 1000 750 Jonathan Poland

Sitting here on my couch at around 5pm reading Warren Buffett’s latest letter to shareholders, and I feel compelled to look up the Berkshire Hathaway stock.

The stock closed above $315,000 per share giving the company a market capitalization over $500 billion. This was the second time in the last 6 years where the growth in Berkshire’s book value (Buffett’s main KPI) outpaced the growth on the S&P 500.

While some companies trade above 20x earnings with nowhere near the financial power of Berkshire, Buffett’s conglomerate is still expensive. It has a flat net cash position (cash/debt), a large ownership in other marketable securities ($170 billion), and the majority of its assets tied to old properties of yesterday’s economy.

And, while I’m definitely not an advocate of cryptocurrencies, I do believe blockchain, machine learning, and other new technologies will not necessarily build on old business models, rather replace them and the companies tied to them entirely.

This is bad news for companies like Berkshire, which should be around for another century considering its current assets. Will it continue to grow at 2x the broad market? NO. The company’s annual growth in book value will only decline. However, the returns achieved in the stock will likely beat the S&P 500 over 5 and 10 year periods for some time.


For 15 years, I published a monthly

newsletter highlighting my very best

ideas across the capital markets

to a select group of investors.

The results speak for themselves.

Performance History

an introduction

Today, I run a membership for

business leaders dedicated to

profit and progress.

Performance results are unaudited pre-tax figures based on buy and sell prices at the time of publication and may vary from actual trade prices by subscribers. Trade ideas were issued via email and various pdf files. My goal has always been to highlight investments that can collectively deliver 100% gains over a 3 to 5 year period. These are typically stocks, but may include options, commodities, real estate, and other investments where I feel confident in my analysis. If you have any questions, get in touch.
Disclaimer: I am not a registered investment adviser. Under no circumstances does any information published in my newsletter represent a recommendation to buy or sell a security. The information on this website is not intended to be, nor does it constitute, investment advice or recommendations. In no event shall I be liable to any subscriber, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on this website or its related newsletters, or relating to the use of, or inability to use, this website or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. Past results do not guarantee future performance.
Note: My research is and has always been of a general and impersonal nature, in that the advice provided is not attuned to any specific portfolio or any client’s particular needs; and is of general and regular circulation, in that it is not timed to specific market activity or to events affecting, or having the ability to affect, the securities market.