Warren Buffett

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Warren E. Buffett, 2005 Teaching Note Synopsis and Objectives Suggested complementary case about investment managers and superior performance: “Bill Miller and Value Trust” (Case 2). Set in May 2005, this case invites the student to assess Berkshire Hathaway’s bid, through MidAmerican Energy Holdings Company, its wholly owned subsidiary, for the regulated energy-utility PacifiCorp. The task for the student is to perform a simple valuation of PacifiCorp and to consider the reasonableness of Berkshire’s offer. Student analysis readily extends into the investment philosophy and the remarkable record of Berkshire’s chair and CEO, Warren E. Buffett. The case is an introduction to a finance course or a module on…show more content…
Moreover, it deals with the immediate opening problem of the case: the market’s response to the PacifiCorp announcement. Finally, it should help to motivate a discussion of Buffett’s investment philosophy. 2. Based on your own analysis, what do you think PacifiCorp was worth on its own before its acquisition by Berkshire? This question expands upon the opening question and helps deepen the mystery about the acquisition—the bid price seems to be a fairly full-price offer for PacifiCorp. 3. Well, maybe Buffett is overpaying—does he have a record of overpaying in the past? Here, the discussion should shift to an analysis of Berkshire’s general record, its experience with MidAmerican, and its experiences buying equity positions in the Big Four. The general conclusion will be that Buffett has done very well as an investor and as the manager of Berkshire. 4. Here are the major elements of Buffett’s philosophy. What do those elements mean? Do you agree with them? On a sideboard, one could list the major topic headings given in the case. The aim here should be to discuss the intuition behind each point: why Buffett holds those views and what they imply for his work. If the students already have been exposed to the major underpinnings of modern finance, this segment of the discussion would take the form of a quick review. For novices, this segment would warrant slower development. 5. Let’s return to the
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