FINAN$4263$

Case $1$: Warren E$.$ Buffett, $2015$

Questions

Who is Warren E$.$ Buffett? How would you describe the business of Berkshire Hathaway?

How well has Berkshire Hathaway performed? Over the long term? Recently? $($Supplement the exhibits from the text with current data$)$

What is your assessment of Berkshire Hathaway's investments in Buffett's largest equity positions shown in case Exhibit $5?$ Has he been uniformly successful in making major investments?

Prepare to describe the elements of Buffett's investment philosophy. How might this philosophy differ from that of other investments styles, such as a very active day trader, a chart watcher, or someone who passively invests in index funds?

From Buffett's perspective, what is intrinsic value? Why is it accorded such importance? How is it estimated? What are the alternatives to intrinsic value? Why does Buffett reject them?

Critically assess Buffet's investment philosophy. Be prepared to identify points where you agree and disagree with him.

What is the possible meaning of the changes in stock price for Berkshire Hathaway on the day of the acquisition announcement? Specifically, what does the $$4$ billion loss in Berkshire Hathaway's market value of equity imply about the intrinsic value of Precision Castparts $($PCP$)?$

Should Berkshire Hathaway's shareholders endorse the acquisition of PCP$?$ Why or why not?

Based on the multiples for comparable companies, what is the range of possible values for PCP$?$ What questions might you have about this range?

Please estimate and discount the free cash flows to estimate the value of PCP$.$ To do this, you may need to estimate PCP$\text{'}$s weighted average cost of capital $($WACC$).$

Assess the bid for PCP$.$ How does it compare with the firm's intrinsic value?