Even Berkshire Hathaway was able to participate in the run-up from the 2009 low. Once the recovery in stocks started it was off to the races for most investors. The period from 2008 to 2009 provided exceptional opportunities for new investors to buy Berkshire Hathaway as the markets, economy and insurance industry were in crisis mode at the exact same time. Our decision to cut the CAGR of the book value in half was in deference to Buffett’s desire to better deploy the capital in other investment opportunities and the possible diminished impact of the succession team upon Buffett’s “retirement.”Īfter borrowing the dividend policy from Buffett’s primary business partner and creating a hypothetical dividend and a compounded annual dividend growth rate, assuming regular dividend increases for the last 35 years, we believe that we have constructed a reasonable approximation of an Altimeter which is represented in the chart below.īased on the Altimeter, our best guess is that the period from 1996 to 2008 provided consistent indications of when to add to your positions of Berkshire Hathaway (at or below green line). Because Berkshire Hathaway has a 19.8% CAGR of their book value (2011 annual report), we opted to cut that figure in half and assign a dividend growth rate of 9.9%. Additionally, we took into consideration the fact that by 2010 Wesco Financial had a 38-year history of consecutive dividend increases. Next, we compared the compound annual growth rate of the dividend for Wesco Financial which was slightly more than the book value from 1999-2010, at 3.37% and 3.01%, respectively. We thought that there would be no better corporate dividend policy to replicate other than that of Warren Buffett’s right hand man.Įxactly what portion of Munger’s dividend policy did we replicate? First, we took WSC’s average dividend payout ratio of 13% from 1999-2010 and applied it to Berkshire Hathaway’s 1977 reported operating earnings of $22.54 per share. So, how did we arrive at a dividend for Berkshire Hathaway? We borrowed the dividend policy of Charlie Munger’s Wesco Financial ( WSC).

As we all know, Berkshire Hathaway does not pay a dividend. Instead, this is what Edson Gould’s Altimeter suggests that Berkshire Hathaway’s ( BRK-A) stock price is currently trading at.Įdson Gould’s Altimeter compares the current stock price relative to the dividend that is paid by a company. No, this isn’t an article about the prospect of Berkshire Hathaway falling from the current price of $121,950 to $32,100.

Wesco financial corp