Mike Shedlock

"Smart Money" sees A Bargain in Berkshire Shares

A 52-week low, a long track record, and a modest valuation -- even Buffett would buy, writes Dave Kansas ...Berkshire shares look remarkably cheap.

Berkshire hit $109,925 on Wednesday, its lowest level since June 2010. They have since recovered a bit to trade above $112,000, but the shares are still down about 14% since a Feb. 28 high of $131,300. Berkshire's shares haven't traded below $100,000 since January 2010. Berkshire's B shares, which trade at about $75, have performed in similar fashion.

At the end of the first quarter, Berkshire had a book value of $97,081 a share. That means Berkshire is trading about 1.15 times book value. According to Barclays, Berkshire's historical median valuation is about 1.7 times book value, and 1.1 times book value is about as cheap as Berkshire has gotten in past decade. Its historical price/book multiple since 2000 has been about 1.6. That would be about $155,000 a share based on first-quarter book value.

Mike Shedlock

Mike Shedlock is a registered investment advisor representative for Sitka Pacific Capital Management.