No disagreement here -- stocks, and for that matter, anything on Earth, are valued largely by what people are willing to pay. And during times of craziness, people are often willing to pay too little or too much, the latter of which is what I think is happening here. The best we can do is come up with approaches that attempt to set a fair price for a stock (or an item), and one such strategy is Graham's Criteria for the Defensive Investor.What determines the price of a stock though is not the valuation but rather how many people want it and the price they will pay.
Well, therein lies the reason for why I think the stock is overvalued. There are plenty of well-run companies that don't command such stratospherically expensive valuations. You can think of the difference between this stock's current price and it's "fair value price" (however you measure that -- maybe using a DCF model or some other approach) as being "buffeted" by Warren himself. And looking at its price, I (personally) wouldn't ascribe anywhere near that much value to the company based on one man.If there is one person out there that people recognize as being a GOD of investing it's Buffet [sic].
But there is a metric for people's willingness to pay for earnings, the P/E. Look at many former growth stocks in the tech industry, Cisco, MSFT, RIMM, companies people used to pay 50-100X earnings for, now people won't pay more than 15X earnings.What determines the price of a stock though is not the valuation but rather how many people want it and the price they will pay.
I don't think I said it was "cheaper" rather more affordable in relative dollar terms ($3k v $74).My only gripe with the OP's post is that just because the $ figure of the stock has been reduced through a stock split, doesn't make the stock any 'cheaper'. If anything, the recent run-up in price suggests that BRK.B was cheaper when it was trading at $3000 than what its at now.
What determines the price of a stock though is not the valuation but rather how many people want it and the price they will pay. .
brk.b is expensive right now. everyone is flocking to it b/c of a lower individual unit price. at the first drop in stock price they will head for the exits for the same reason, lowering the price to a point that will be attractive. then, my friends, you should beg, borrow, and steal money to get in.
same applies for real estate. it has been a long wait, but get your cash ready...
I really have no idea what it was worth a month ago. Why is it almost every review I read says this stock is undervalued? Can you share with us why you feel this stock is overvalued?too funny, it was worth $50 less than 6 months ago. I can see the frenzy driving it up to $90-100. get out at $85-89 if you can...
I dont think buffet is much of an idol....rememeber that he's a shark and relied alot on luck. I look at companies like ameritrade who perfected the idea of hording small investors and giving them satisfactory returns or even monthlyreturns who is i admit not as fruitful as ameritrade but has cemented the basic concept of giving the client what they want. Long term returns that are reliable. But there's one thing i dont understand...Why do bonds seem to be running out of fuel in this market?Berkshire is nowhere near the Graham criteria for defensive investors, so it isn't anywhere close to being on my radar.
Some of the valuation metrics are shockingly high:
Trailing P/E (ttm, intraday):34.73
What determines the price of a stock though is not the valuation but rather how many people want it and the price they will pay.
If there is one person out there that people recognize as being a GOD of investing it's Buffet. So everybody with a trading account will want at little piece plus the money managers will have to buy in too.
It's supply and demand folks and Buffet is the guy selling tarps at a hurricane party.