CASE # 1
WARREN E. BUFFETT, 2005
In preparing to discuss this case, you should pay particular attention to the issues described under. Of course , feel free to consider and evaluate any other issues that come to mind as well; the purpose of this list is to alert you to things that I i am particularly very likely to ask you to go over in class.
1 . What is the possible meaning of the changes in share price pertaining to Berkshire Hathaway and Scottish Power plc on the day from the acquisition story? Specifically, what does the $2. 17-billion gain in Berkshire's market value of fairness imply about the innate value of PacifiCorp?
2 . Based on the multiples to get comparable controlled utilities, precisely what is the range of possible beliefs for PacifiCorp? What inquiries might you could have about this selection?
3. How well has Berkshire Hathaway performed? Just how well has it performed inside the aggregate? How about its expense in MidAmerican Energy Coalition?
4. What is their assessment of Berkshire's expenditure in Buffett's " Big FourвЂќ: American Express, Coca-Cola, Gillette, and Wells Fargo?
your five. From Warren Buffett's perspective, what is " intrinsic worth? вЂќ Why is it accorded these kinds of importance? How is it believed? What are the alternatives to intrinsic value? Why does Buffett reject all of them?
6. Seriously assess Buffett's investment philosophy. Be prepared to determine points to agree and disagree with him.
7. Assume I would have been to evaluate your analysis to this point as follows: " One area wherever Buffett will abide by modern financial theory is his idea in cheaper cash flow evaluation. Therefore , the market multiple research in question 2 above would be a waste of time. вЂќ How do you respond?
eight. Should Berkshire shareholders promote the purchase of PacifiCorp?