The vice chairman of Berkshire Hathaway, Charles Munger, passed away on the 28th of November last year and the share price of BRK-A didn’t budge (It fell 0,11%). I guess the company has mitigated their key-person dependency effectively.

Apple shares, which make up 50,04% of the BRK-A listed stock holdings, have fallen 3,17% this year. Meanwhile Berkshire Hathaway is up 2,74%. I guess the company has diversified their holdings effectively.

Whether it’s Logan Paul, Elon Musk or Warren Buffet, investors will gladly invest in people and pay a premium for whatever they sell. All three of these businessmen have successfully used their reputation to attract money. The January effect didn’t materialize last week and scared investors rotated their money to someone they could trust, namely Warren Buffet. Since the BRK-A and BRK-B stock prices are not the sum of the underlying assets divided by outstanding shares, this is actually a quite interesting strategy. Instead of thinking about gold as a safe haven, maybe there are persons that can be considered safe havens?

Some equate Warren Buffet’s investment performance to the stock performance of BRK-A (which the last ten years has been the same as the S&P). A little known fact is that his actual skill is not to barely beat the index, but to convince people to invest in his reputation. The more investors buy the stock, the more money he will make. So what will happen with the stock price when he will pass away? Will it hold steady as was the case when his right-hand man passed away?

If BRK-A was an ETF (exchange traded fund), the stock price would not be affected by personnel change. Just like the richest man in the world, there will always be someone at the helm and their name will temporarily be familiar to everyone.

But wait… Are we even paying a premium for Warren?

Today the intrinsic value of Berkshire Hathaway (BRK.B) is 438.78 USD based on the Discounted Cash Flow model. With the current market price of 363.68 USD, the upside of Berkshire Hathaway Inc is 20.6%. Based on Peter Lynch’s Fair Value formula the value is 882.94 which gives an upside of 141,5%*. Someone tell Warren to call Peter. Huge investment opportunity.

*source: valueinvesting.io 2024-01-06