Mar 14th, 2007 by Martin Lee
The letters of Warren Buffett are written one year apart. Sometimes, he will repeat certain points a few times in different years. This helps to remind existing shareholders as well as teach new shareholders his ideas.
On the other hand, my blog is more like Buffettology condensed. I take about two weeks to summarise each of his letter. So sometimes, in less than a month of so, you might read about the same topic twice.
After starting on this journey from 1977, I’m now at 1994 and closing in onto 2007. Hope to get there soon!
Look Through Earnings
Look-through earnings is used to more accurately portray Berkshire’s earnings. It consists of:
(1) the operating earnings, plus;
(2) the retained operating earnings of major investees that, under GAAP accounting, are not reflected in Berkshire’s profits, less;
(3) an allowance for the tax that would be paid by Berkshire if these retained earnings of investees had instead been distributed to us.
The “operating earnings” that is mentioned here exclude capital gains, special accounting items and major restructuring charges.
For the intrinsic value of Berkshire to grow at 15%, their look-through earnings must also increase at about that pace.