Suggested Questions for Advance Assignment
1. What is the possible meaning of the changes in stock price for Berkshire Hathaway and Scottish Power plc on the day of the acquisition announcement? Specifically, what does the $2.55 billion gain in Berkshire’s market value of equity imply about the intrinsic value of PacifiCorp?
2. Based on the multiples for comparable regulated utilities, what is the range of possible values for PacifiCorp? What questions might you have about this range?
3. Assess the bid for PacifiCorp. How does it ...view middle of the document...
(Why did I pick adjusted close prices?) Comment on how BRK-A compared to benchmark. How well has it performed in the aggregate? What about its investment in MidAmerican Energy Holdings?
5. What is your assessment of Berkshire’s investments in Buffett’s Big Four: American Express, Coca-Cola, Gillette, and Wells Fargo? Calculate the compound annual return from purchase date through the date of the case, 2004. Now compare the compound annual return of each vs. SPY from 2004 to a recent date.
6. From Warren Buffett’s perspective, what is the intrinsic value? Why is it accorded such importance? How is it estimated? What are the alternatives to intrinsic value? Why does Buffett reject them?
7. Critically assess Buffett’s investment philosophy. Be prepared to identify points where you agree and disagree with him. As part of your analysis, go to the Berkshire Hathaway website and click on the Owners Manual. It discloses his investment philosophy. Pick two or three items that are of particular interest to you and be prepared to discuss them. Where do you disagree with Buffet?
8. Should Berkshire Hathaway’s shareholders endorse the acquisition of PacifiCorp?