I have a guestion about the calculation of Berkshire Hathaway’s free cash flow. How did you come up with the numbers, did you take “Cash flow from operating activities” and then subtract “Additions to property, plant and equipment”, or did you change some part in the calculation to come up with free cash flow?

If there’s somebody else out here having a good answer to my question I’d be happy if you’d like to share it.

Thanks for a great blog!

/E

Of course the reason Chanos is shorting MCO may be the same reason effecting MHP’s share price recently. Obviously I need to do a lot more investigating.

MHP looks like it warrants further research. Quick calculation and it appears to be about 35% undervalued.

I would be carefull with MCO. Jim Chanos has been shorting MCO.

Check out the series of posts on Calculating The Value Of A Business. Also, take a look at the various posts under Valuing A Business and Stock Analysis. There are a number of start-to-finish examples and I’ll be adding more as I go.

Hope that helps!

I new to the site and really like what I’ve seen here. I especially like that you walk through calculations of specific companies and explain your thought process and conclusions – even if you conclude that you would NOT buy something WB recently bought.

(Members in some other value investing sites conclude that something is a good value but don’t discuss WHY in much / any detail. Or, analysis is: “Buffett bought at $50 and it’s at $40 now so it MUST be a good value.” I’m really trying to develop my own evaluation skills so that line of thinking isn’t that helpful.)

I know you have a number of articles on value investing concepts, IV, MOS, etc. but do you have a “start to finish” example? I have a few companies I want to evaluate further and like your approach and wanted to use a complete example as a road map or checklist for coming to my own conclusions.

PS. The companies are MCO and MHP – both are solid performers whose share prices took a major hit in the recent credit crunch. It could be an excellent buying opportunity but I want to do my due diligence.

I’m having a hard time getting into the SEC’s database to look at BUD’s annual reports. With seemingly weak free cash flow, my first thought would be that BUD has been using a lot of its cash to fuel growth – much like Walmart has been doing. (See this comment)

I am pretty sure that Buffett bought some 70 million shares of BUD, but has sold almost half his position. I can’t say for sure, but maybe there wasn’t as much value as he’d like, decided to make an educated gamble (as he tends to do from time to time), and it didn’t work out.

Take a look at Matt Stichnoth’s notes from the Berkshire 2005 annual meeting (free, but you have to click that you accept the terms of the site). Buffett and Munger (WB & CM) talk briefly about the purchase. They both seem very tenative – not the joking boys that playfully discussed other major purchases.

I can’t be certain, but I don’t feel like Buffett saw a “fat pitch.” I think he saw a potential opportunity for a calculated gamble.

I did the same thing with BUD and got the same results. So I too am interested in Joe’s take.

Another BRKA holding that looks priced close to a 25% discount to intrinsic value to me is PG.

Mike