Whitney Tilson had a good update presentation on some of his ideas this morning — nothing earth-shaking, and not much “new” news beyond what he shared during our pre-conference seminar yesterday or in past conferences, but he did reiterate his pitch that Berkshire Hathaway remains a ridiculous bargain, he now puts roughly a 12 PE on Berkshire’s operating businesses and calls the value $175,000 a share, so a fair piece below the current $134,000 price (it’s currently $90 for the B shares, for us commoners). That’s still a conservative price, I think, and he says it doesn’t include any Buffett premium since that values this as a “below average” company.
They’re around 1.25X book value now, below “intrinsic value” per Buffett or Tilson, and experiencing nice operating profitability and leverage thanks to the growing stable of successful operating businesses they own (aside from the stakes in publicly traded companies), so I wouldn’t argue against buying the stock … and I agree that though Buffett is irreplaceable, they also need him less now than they did five years ago, and he’ll be around for a while.
I do always feel slightly greedy and hope that it drops a wee bit. It probably won’t fall back to 1.1X book value in the near future, since everyone knows that’s Buffett’s floor for doing buybacks, but it might fall below 1.2X book again, or Warren might get a hangnail and a few people would sell. Hope springs eternal.
Tilson also again touted Howard Hughes (HHC), which is the spinoff that Bill Ackman engineered of the “strange stuff” from General Growth Properties when GGP was going through bankruptcy. It has doubled, but he thinks the fair value of the assets, most of which are prime for development or redevelopment, ranges between the current price and about 2X the current price, so it’s not a drop dead bargain but it’s a “limited downside, big upside” play on real estate.
HHC has few natural stock market buyers because it’s a real estate company without leveraged earnings (they have mortgages, but not much debt) and without a dividend, but over the next 3 years their development projects should change the income statement dramatically and increase the value of many of their assets. Tilson went through a few of their major assets, including Summerlin outside Las Vegas and South Street Seaport here in New York, and ...