Berkshire Hathaway Inc. is not suitable for the more conservative Defensive Investor or the Enterprising Investor. Both investor types are turned off by the lack of dividends. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should proceed only with a cautious and speculative attitude.
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $4.15 in 2011 to an estimated $7.22 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.52% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.
Disclaimer: The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours. Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.