Overview of TIP810: Berkshire Hathaway 2026 Valuation w/ Chris Bloomstran
This episode is an in-depth pre–Berkshire Hathaway annual meeting conversation with Chris Bloomstran of Semper Augustus, focused on Berkshire’s intrinsic value, the transition from Warren Buffett to Greg Abel, and broader market themes like share repurchases, capital allocation, profit margins, and the AI capex boom. Bloomstran argues Berkshire remains attractively valued, that the media misread the company’s earnings decline, and that Greg Abel’s first annual letter and compensation structure were both appropriate and encouraging.
Berkshire Hathaway Intrinsic Value and Valuation Framework
Bloomstran walks through the four valuation methods he uses for Berkshire:
- Sum of the parts
- GAAP-adjusted / “economic” earnings
- Price-to-book methodology
- A two-prong approach that separates marketable securities from operating businesses
Key valuation takeaways
- He estimates Berkshire’s intrinsic value rose about 9.3% year over year.
- That puts Berkshire at roughly $1.2–$1.25 trillion in market-cap-equivalent intrinsic value.
- On a per-share basis, he estimates:
- B shares: about $570
- A shares: about $855,396
- At the time of recording, he believes Berkshire was trading at roughly 85 cents on the dollar to fair value.
What drove the change
Bloomstran says the major contributors were:
- Stock portfolio total return: about 13.7%
- Book value growth: about 10.5%
- Operating performance in key subsidiaries, despite media headlines suggesting otherwise
He stresses that Berkshire’s reported operating earnings were distorted by:
- Currency translation effects
- Lower interest income on T-bills
- Underwriting fluctuations
- Goodwill write-downs
His conclusion: Berkshire’s operating earning power was better than headline numbers suggested.
Why the Media Misread Berkshire’s Earnings
A major theme was that mainstream commentary misunderstood Berkshire’s earnings decline.
Bloomstran’s corrections
He says you have to strip out:
- Currency translation gains/losses
- Stock portfolio gains/losses
- Non-economic goodwill write-downs
He also notes that Berkshire’s core businesses were generally solid:
- Railroad earnings were up nearly 9%
- Energy earnings were up about 7%
- Manufacturing, service, and retail group earnings were up about 4.5%
Insurance specifics
He highlights that:
- GEICO remained very profitable, though less exceptional than the prior year.
- The combined ratio was still strong, even if somewhat weaker than the year before.
- Berkshire remains disciplined and will shrink or run off insurance lines when pricing is unattractive.
Greg Abel’s First Letter and Berkshire’s Transition
Bloomstran was broadly positive on Greg Abel’s first annual letter and sees it as evidence that Abel understands Berkshire’s culture and capital allocation priorities.
What he liked
- A respectful tribute to Buffett
- Clear recognition of Berkshire’s culture, conservatism, and integrity
- More detailed discussion of operating subsidiaries and insurance businesses
- Focus on the actual economics of Berkshire, not just Buffett nostalgia
His bigger takeaway
Bloomstran thinks Abel:
- Knows the business well
- Has been effectively running Berkshire for years already
- Is the right person to oversee capital allocation going forward
He also sees Ted Weschler’s role as expanding beyond managing part of the portfolio to becoming a broader capital-allocation resource.
Greg Abel’s Compensation: Why Bloomstran Approves
Bloomstran argues that Greg Abel’s $25 million compensation package is appropriate.
Why he thinks it works
- Abel is already wealthy
- He has meaningful personal ownership in Berkshire
- Berkshire historically avoids stock options and restricted-stock gimmicks
- The company’s incentive structure is based more on ownership, culture, and responsibility than short-term compensation engineering
His view is that integrity matters more than the exact incentive formula:
- Good comp structures help
- Bad ones can hurt
- But ultimately, the quality of the person matters most
Capital Allocation, Share Repurchases, and “Swinging Hard”
Bloomstran emphasized that the real test for Greg Abel will not be his letter, but how he acts during the next major market dislocation.
His view on cash
He notes Berkshire has enormous liquidity and says the company should be willing to deploy a very large amount of capital in a crisis:
- Roughly $300 billion or more if the opportunity exists
- Either into whole businesses or into large stock purchases
What he wants to see
- Capital deployed aggressively when prices are favorable
- No hesitation just because Berkshire is “already sitting on cash”
- A willingness to buy when fear is high, not when it’s easy
He repeatedly returns to the idea that opportunity cost is real and that cash can become a drag if it is held too long without a reason.
Profit Margins, Market Valuation, and the “New Normal”
Bloomstran revisits Buffett’s old argument that profit margins mean-revert, but updates it for today’s economy.
His view
- He agrees margins are durably higher than in the old industrial economy.
- But he does not believe that automatically justifies permanently higher valuation multiples.
Why margins are high
He points to:
- Lower interest expense relative to GDP
- Lower corporate taxes than in the past
- The rise of highly profitable, capital-light tech and platform businesses
Why he’s cautious now
- The S&P 500 is trading at around 26x earnings
- Margins are at historically high levels
- He believes high margins plus high multiples are often a recipe for weak future returns
He also warns that some of the biggest tech companies are moving from capital-light models toward heavy AI-related capex, which may pressure margins and reduce their ability to keep buying back stock.
OpenAI, AI Capex, and Capital Cycle Risk
One of the more skeptical sections of the discussion centers on the AI boom.
Bloomstran’s concern
He argues that:
- The industry is spending enormous amounts on data centers, chips, and infrastructure
- The returns required to justify that capex are very hard to earn
- The economics of the AI arms race may not support the valuations being paid
On OpenAI specifically
He walks through a series of funding rounds and argues the business is burning through capital very quickly while expectations keep rising.
His bottom line:
- AI may be transformative
- But the capital intensity and competitive dynamics make it difficult to see how all participants earn acceptable returns
Share Repurchases: Big Numbers, Mixed Results
Bloomstran’s annual letter also criticizes the way the market talks about buybacks.
Main point
A trillion dollars of repurchases sounds impressive, but:
- It has not meaningfully reduced share count
- Much of the activity has simply offset dilution
- Buybacks are often done without much regard to valuation
His framework
He says repurchases are good when:
- The stock is trading below fair value
- The business has no better use for capital
He says they are harmful when they:
- Are used to mask weak economics
- Simply support short-term stock prices
- Enrich executives more than shareholders
He believes the market’s current repurchase patterns have often been poorly timed and have not created enough true long-term value.
Personal Reflection: Health, Succession, and Staying Sharp
The conversation ends on a thoughtful note about Guy Spier’s health issues and the broader issue of cognitive decline and succession planning.
Bloomstran’s response
He explains that he has:
- Formal and informal succession plans in place
- Trusted colleagues who would step in if needed
- A community around him that would notice if he began to decline
He also reflects candidly on the possibility of:
- Sudden illness
- Gradual mental decline
- The importance of returning capital and protecting clients if he were ever unable to manage money properly
The tone is thoughtful and personal, reinforcing the episode’s recurring theme: good investing is inseparable from character, discipline, and responsibility.
Final Takeaways
- Berkshire remains attractive relative to Bloomstran’s estimate of intrinsic value.
- Greg Abel’s transition looks smoother than many expected.
- Capital allocation discipline will be the key test for Berkshire’s post-Buffett era.
- High market multiples and AI capex may be setting up future margin pressure.
- Share repurchases are not inherently good or bad; the valuation discipline behind them matters.
- In Bloomstran’s view, integrity and judgment remain the most important traits in both management and investing.
Where to Find More
Bloomstran notes that his full annual letter and archived interviews are available on the Semper Augustus website.