In a recent post, I mentioned how happy I was to get confirmation from private investors that my Intrinsic Value estimate for IMS Healthcare (NYSE:RX) of $21.70 matched up almost exactly with their $22 buyout offer (giving me a 67% return since my August purchase). In the same post, I described how my 2009 free cash flow estimates for Pfizer and Forest Labs were in line with the great Bruce Berkowitz of the Fairholme fund. So far, so good.
A few weeks ago Warren Buffet’s Berkshire Hathaway agreed to buy railroad operator Burlington Northern Santa Fe Corp. (NYSE:BNI) for $100 per share. So I went to my own Intrinsic Value calculations, and to my pleasant surprise, $94 per share popped out of the calculator. More confirmation that I may be on to something good here.
BNI is not a stock I would normally have purchased, The numbers I look for (ROIC, profit margin, stability of cash flows, etc.) don’t meet my minimums. I couldn’t enjoy the 28% one-day jump on the news, but I’m pleased to have confirmation from Warren that I wasn’t too far off in the basic calculations.