Berkshire Meeting: Book Value vs. Share Price vs. Intrinsic Value

Features Dow Jones Newswires

Time for a wonky analyst question about Berkshire's book value versus its market value.

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Mr. Buffett used to tell shareholders to pay more attention to book value than market value (otherwise known as the share price), but in recent years he has backed away from that.

Book value doesn't capture the full worth of many of Berkshire's businesses, he says, because companies are included at the price Berkshire bought them, rather than their current worth. Some Berkshire subsidiaries are worth more than 10 times than what appears in the company's earnings reports, he says. "We've also got some clunkers too."

To Mr. Buffett, the number that really matters is Berkshire's intrinsic value--but he doesn't reveal that number. And it's very subjective, based on estimates of future interest rates and so on. So it's easiest to stick with book value, he says, even if it is a flawed metric.

Click here to see the full live coverage of Warren Buffett at Berkshire Hathaway's annual meeting:

http://www.wsj.com/livecoverage/berkshire-hathaway-2017-annual-meeting-analysis

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Write to Nicole Friedman at nicole.friedman@wsj.com

(END) Dow Jones Newswires

May 06, 2017 15:53 ET (19:53 GMT)