It’s no secret that Buffett actually purchased Berkshire Hathaway out of anger at the former CEO. At the time he started buying shares, they were worth less than $10 per share. When he took control of the company and began to turn it around, shares were valued at less than $30. However, over the decades of his tenure as the chairman of the company, it has grown into one of the world’s largest and most successful companies. Now in 2017, Berkshire Hathaway is the world’s most expensive stock and its Class A stocks go for around $250,000 each.
But what does Buffett think the stocks are actually worth? Well, as it turns out, that question is harder to answer than it might seem.
According to Buffett, he would consider repurchasing when the company’s value was at 120% of Berkshire’s book value. That price might seem like an odd number, but in his last letter, Buffett explained his reasoning somewhat. Without going into an accounting lesson, the fact of the matter is that the company looks like it is worth less than it actually is due to write-offs and such. This is often referred to as the company’s intrinsic value.
Buffett has never come out and explained exactly how he figures out a company’s intrinsic value, and so predicting a precise numeric value for Berkshire stock is hard to say. The Motley Fool suggested that 120% of the book value would translate to around $206,500, which seems like a pretty solid guess. At the time of writing, the stock is valued at around 150% of the book value.
So what does that mean for the average investor? Stocks tend to go up and down frequently and we aren’t all Warren Buffett–it can be hard to determine what price is the best value. However, it’s probably safe to say that if the 120% price is good enough for Buffett to consider repurchasing stock, it’s probably a good bargain and therefore a great time to get in on owning a share in Buffett’s company yourself if you have the money. Remember that if you don’t have more than $200,000 sitting around, there are always Berkshire’s Class B shares which are considerably less expensive.