Book Value – A Buffett Favorite, But Far From Perfect

Article Summary Warren Buffett reports Berkshire’s book value in Berkshire’s Annual Letter, but Buffett admits it is not perfect in determining the value of a firm. The price-to-book ratio is a popular factor, taking book value into consideration, but the effectiveness of this value factor has been fading recently. A prominent quantitative firm shows how share buybacks may be clouding price-to-book’s usefulness. The takeaway for investors is no factor is perfect. ———————- How does an investor know what a company is really worth? For some, a standard accounting measurement known as book value will provide the big clue. It is […]