Why Does Warren Buffett Calculate His Return Based On The Book Value Of Berkshire Hathaway's Stock Rather Than The Market Value? by S&C Messina
I would point to a few reasons.
- One is that insurance companies trade relative to their book value on a price to book or P/B basis. With a lot of the book value of Berkshire coming from the aggregate book value of its insurance companies, it makes sense to measure and value Berkshire on the basis of its total book value. Much of Berkshire’s equity value is also created from utilizing its massive insurance “float”, which is another reason to look at Berkshire like an insurance company. Other businesses that manage assets and liabilities to...
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