Stock
BERKSHIRE HATHAWAY
PURCHASES GEICO
WARREN BUFFET
Executive Summary
Berkshire Hathaway has made a bid for the remaining portion of GEICO stock. This report reviews the offer initiated by Warren Buffett. The details of this report include:
•
Valuation of GEICO stock. The $70 offer made by Warren Buffett and Berkshire
Hathaway includes a 26% premium over the current GEICO stock price of $55.75.
This report attempts to determine a range of appropriate stock prices for GEICO.
Using the Gordon dividend discount model, along with historical dividend information and projections by Value Line, we estimate the value of GEICO stock in the range of $58 to $80. A review of historical growth rates in GEICO dividends also lends credibility to the investment’s future potential.
•
Review of Warren Buffett’s investment record. While our analysis lends credence to the bid price of $70 per share for GEICO, we also examine the historical record of
Warren Buffett. Buffett’s investment success may add to shareholder’s comfort, as his track record is remarkable when compared to broader market results.
•
Buffett’s investment philosophy. A letter to shareholders gives us a unique look at
Buffett’s considerations for investing. By reviewing his checklist, we attempt to gain insight as to why such a premium is included in the GEICO offer.
•
Other issues. Buffett’s position on GEICO’s board of directors may shed light on the amount of information Buffett had about the future prospects of GEICO.
At first glance, there appears to be some support for a higher price for GEICO. Value
Line’s publication shows that the offer price is reasonable and historical growth rates may indicate reason to be optimistic However, only time will tell.
GEICO Valuation
GEICO Corp. currently sells for $55.75. The bid price of $70 per share represents a 26% premium over the existing share price. We look at the value of GEICO shares in two separate ways:
1.
PURCHASES GEICO
WARREN BUFFET
Executive Summary
Berkshire Hathaway has made a bid for the remaining portion of GEICO stock. This report reviews the offer initiated by Warren Buffett. The details of this report include:
•
Valuation of GEICO stock. The $70 offer made by Warren Buffett and Berkshire
Hathaway includes a 26% premium over the current GEICO stock price of $55.75.
This report attempts to determine a range of appropriate stock prices for GEICO.
Using the Gordon dividend discount model, along with historical dividend information and projections by Value Line, we estimate the value of GEICO stock in the range of $58 to $80. A review of historical growth rates in GEICO dividends also lends credibility to the investment’s future potential.
•
Review of Warren Buffett’s investment record. While our analysis lends credence to the bid price of $70 per share for GEICO, we also examine the historical record of
Warren Buffett. Buffett’s investment success may add to shareholder’s comfort, as his track record is remarkable when compared to broader market results.
•
Buffett’s investment philosophy. A letter to shareholders gives us a unique look at
Buffett’s considerations for investing. By reviewing his checklist, we attempt to gain insight as to why such a premium is included in the GEICO offer.
•
Other issues. Buffett’s position on GEICO’s board of directors may shed light on the amount of information Buffett had about the future prospects of GEICO.
At first glance, there appears to be some support for a higher price for GEICO. Value
Line’s publication shows that the offer price is reasonable and historical growth rates may indicate reason to be optimistic However, only time will tell.
GEICO Valuation
GEICO Corp. currently sells for $55.75. The bid price of $70 per share represents a 26% premium over the existing share price. We look at the value of GEICO shares in two separate ways:
1.