Warren Buffet And His Investment Philosophy

1812 WordsMar 20, 20178 Pages
This case revolves around warren Buffet and his investment philosophy. Warren was the chairman of Berkshire Hathaway. The company had a subsidiary called mid-American holding company. This subsidiary intended to acquire PacifiCorp from its parent company known as Scottish power plc. The consideration was $5.1b in cash and 4.3 in preferred stock and liabilities. Berkshire Hathaway was a textile company. The case gives Warren Buffet’s Journey from the time he and his partners acquired Berkshire Hathaway and how they successfully navigated through depressions and inflation period to bringing the company to a profitable venture. There is also an outline on the various investments along the way which contributed to diversification and also…show more content…
Here is a breakdown of the data Item Median $(Billions) Mean $(Billions) Revenue 6.252 6.584 EBIT 8.775 9.289 EBITDA 9.023 9.076 NET INCOME 7.596 7.553 EPS 4.277 4.308 Book Value 5.904 5.678 Under normal circumstances revenue is usually greater than EBITDA which is in turn greater than EBIT which is usually greater than net income. In the case of PacifiCorp the arrangement of the ranges of these items is as follows (Revenue < EBITDA > EBIT > NI). This results as outlined in exhibit 10 is not very practical and the general expectation is that Revenue should be greater than earnings before any deductions. If you use CAPM for the simple DCF analysis: K=rf+B(rm-rt) rf=5.762 K=5.762+.75(10.5-5.762) B=.75 =9.32%=Discount rate rm=10.5 $5.1/(1+.0932)=$4.76 => it is in range of the rest of the comparable firm The company was originally Berkshire before merging with Hathaway in the year 195. It was started in the year 1889 and rose to become England’s biggest textile producing company. At the time it also accounted for 25% of the cotton produced in the United States. The years after merging with Hathaway were turbulent due to increasing inflation and technological advancement as well as increasing competition. Warren Buffet and his partners came in the year 1965 with the sole purpose of reviving the fortunes of the company. It took almost 20 years to revive the

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