200.35 -0.17 (-0.08%)
After hours: 4:12PM EDT
|Bid||200.35 x 100|
|Ask||200.36 x 3700|
|Day's Range||199.20 - 201.48|
|52 Week Range||160.93 - 217.62|
|PE Ratio (TTM)||11.00|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||231.75|
Berkshire Hathaway (BRK/B), the well-known Warren Buffett investment vehicle for the last 50 years, has been the subject of many good notes and discussions. In this note I will briefly cover general background and then discuss a few key topics as to why NOT to buy BRK, and will try to defend my thesis. General background BRK’s business model is unique.
The Zacks Analyst Blog Highlights: AbbVie, Berkshire Hathaway, PepsiCo, BP and Twenty-First Century Fox
Berkshire Hathaway’s (BRK.B) investment portfolio grew to $191 billion in 4Q17 on an increase in its stakes in existing companies and a rise in the valuations of its holdings. In 1Q18, the company is expected to see its investment portfolio valuation fall, as major holdings have seen erosion in the range of 3%–22%. Berkshire could also look to add stakes at their current valuations, as lower prices are offering better valuations.
The Trump administration has initiated a trade war with its allies and China by levying duties on imported goods in order to protest unfair trade practices. President Donald Trump has indicated that he will prolong the war until China opens up to the import of goods and services and doesn’t resort to controlled currency strategy in order to boost exports. In the initial round of levying duties, China has countered the United States with 25% import duties.
Berkshire Hathaway (BRK.B) stock has fallen ~6.8% in the last month, and it’s risen 16.9% in the past year. In comparison, the S&P 500 Index (SPY) has fallen 5.5% over the last month and risen 10.9% over the last year.
Union Pacific (UNP), which is a major Western US rail freight carrier, is scheduled to announce its 1Q18 earnings on April 26, 2018. This Omaha-headquartered carrier witnessed a 0.26% fall in its carload traffic in Week 14 of 2018. Union Pacific hauled ~92,100 railcars (excluding intermodal) that week, compared with ~92,300 railcars in Week 14 of 2017.
In the week ended April 7, 2018, Berkshire Hathaway–owned BNSF Railway’s (BRK.B) carload volumes jumped 8.7%. From 92,000 railcars excluding intermodal units in Week 14 of 2017, the company hauled ~100,000 units in the same week in 2018.
As the broad markets (SPY) fell from their peaks in January 2018, analysts reviewed their price targets. Among major conglomerates and managers (XLF), Berkshire Hathaway (BRK.B) has a next-12-month price target of $349,000, implying a potential rise of 19.0% from its current price. Three out of five analysts have given Berkshire “buy” ratings, and the remaining two have given it “hold” ratings.
In 2018, its operating cash flow is expected to rise further, aided by lower tax and an expected fall in claims in its Insurance segment. Berkshire Hathaway’s CEO, Warren Buffett, has indicated a big-ticket acquisition to investors. Berkshire Hathaway could deploy its existing cash flow toward reducing the leverage of its subsidiaries amid expectations of future rate hikes and an expected increase in capital costs.
CEO Warren Buffett indicated a big-ticket acquisition in his letter to investors. Berkshire announced share repurchases for the first time in 2011. Berkshire will engage in buybacks subject to its valuation not being higher than 1.2x of its book value as well as its overall liquidity not going below $20 billion after repurchases.
In 4Q17, Berkshire Hathaway’s (BRK.B) Services segment benefited from consumer spending, which drove revenue growth of 4% on a YoY (year-over-year) basis to $7.1 billion. Its revenue rose on NetJets, electronics, and media, which have traditionally delivered growth for the company over the past few years. In 1Q18, its revenue is expected to be subdued on a sequential basis, but it could see marginal growth of 3%–4% on a YoY basis on NetJets, furniture, and retailing.
Berkshire Hathaway’s (BRK.B) investments in manufacturing could yield results amid the push for the sector by the Trump administration in recent quarters. This could allow domestic US manufacturers to expand their capacities for intermediates and commodities such as steel. Berkshire Hathaway has maintained a significant stake in the manufacturing sector (VIS) over the years.
Berkshire Hathaway (BRK.B) operates in the energy sector through Berkshire Hathaway Energy (or BHE). Natural gas utilities have seen some pressure on the demand front mainly due to higher input costs driven by higher oil prices (USO). MidAmerican and Northern Powergrid witnessed higher sales costs resulting in lower profitability in 4Q17.
Berkshire, which is USG's largest shareholder with a 31 percent stake, announced its intention on Thursday, two days after Knauf called on USG shareholders to pressure that company to enter merger talks by withholding support for its director slate. Knauf owns about 10.5 percent of USG. "Berkshire's present intention is to vote against the four directors proposed by management," Buffett's assistant, Debbie Bosanek, said in an email.
Amazon (AMZN) is exploring launching a banking service that would appeal to young people and those without traditional bank accounts, according to recent reports by The Wall Street Journal and Bloomberg. The reports about Amazon venturing into the banking business, most likely with a checking account product, came a few months after Amazon, JPMorgan Chase (JPM), and Berkshire Hathaway (BRK.A) (BRK.B) announced that they were teaming up on a healthcare insurance program for their employees.
Berkshire Hathaway said it will heed a call by Germany’s Knauf for shareholders to vote against USG’s four board nominees. Bloomberg's Ed Hammond reports on "Bloomberg Markets." (Source: Bloomberg)...