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Berkshire Hathaway, Inc. (BRK.A, BRK.B) has trudged ahead through market fluctuations over the past nine months. While hedge funds were selling, Berkshire Hathaway’s class B shares outperformed the S&P 500 amidst a bear market. Berkshire Hathaway’s stock rose by approximately 8.6% compared to the S&P’s loss of about 2.3% over the past year.

Berkshire Hathaway is a conglomerate holding company that has evolved, most notably after American businessman and investor Warren Buffet took control in 1965. Buffet transitioned Berkshire Hathaway from textile operations to a holding company with a diverse range of investments and corporate acquisitions. The holding company owns subsidiaries and investments in insurance, railroads, manufacturing, utilities, retail, and home construction. Berkshire Hathaway has four operating sectors: the Insurance Group, General Reinsurance, Reinsurance Group, and Primary Group. Some of the company’s more well-known businesses include GEICO, Candies, Dairy Queen, BNSF railway, Pampered Chef, and Acme Building Brands. The holding company has a split of Class A and B shares. Both serve as investment opportunities, though Class B shares are more modestly priced and more appealing to the average consumer.

Hedge Funds Adjust Portfolios

In the fourth quarter, Berkshire Hathaway received mixed responses from Hedge Funds and Institutions. While hedge funds were selling, some Institutions added the stock to their portfolios, and the aggregate 13F shares held increased to approximately 846.6 million from 843.2 million, an increase of about 0.4%. In contrast, hedge funds decreased their holdings by about 2.6% to 141.6 million from 145.4 million. Overall, for hedge funds, 43 created new positions, 197 added to an existing holding, 15 exited, and 197 reduced their stakes. The 13F metrics through 2022 reflect a recent drop in stock price, while the trend for holdings demonstrates steady improvement over the past twenty years.

Encouraging Multi-year Estimates

Analysts expect to see earnings rise through 2023, with increases in growth that could bring earnings to $14.71 per share in December 2023, up from $13.46 in 2022. Revenue predictions are also noteworthy, with revenue expected to increase to $322.9 billion by December 2023, up from $293.4 billion in December 2022.

Analysts Pull Price Targets

Despite the long-term promise, analysts have lowered price targets on the stock. With accelerated inflation, a rise in interest rates, and pandemic-related supply-chain challenges, the market overall has taken a beating. In the current circumstances, Berkshire Hathaway has done well to outperform the S&P. Analyst Meyer Shields of Keefe, Bruyette & Woods, Inc. lowered the firm’s price target on Berkshire Hathaway’s class A shares to $560,000 from $565,000, while maintaining a Market Perform rating on the stock.

Optimistic Outlook

There is optimism beyond 2022 for Berkshire Hathaway. Earnings and revenue estimates through 2023 are favorable, and Berkshire Hathaway’s dip in value may be seen as a buying opportunity for long-term investors.

Alphabet, Inc. (GOOGL) continues to ride the wave of market volatility, and the company narrowly outperformed the S&P 500 with a loss of almost 1.0% compared to the S&P’s loss of about 1.9% over the past year. Hedge funds sold as Alphabet continued to lose momentum, though the stock rose on the WhaleWisdom HeatMap to a rank of ten from twenty-four.

Alphabet is a technology conglomerate holding company that operates through Google and Other Bets segments. The company was created through a restructuring of Google in 2015, becoming the parent company of Google and its subsidiaries. The restructuring allowed Alphabet to expand into other business areas beyond Google’s internet search and advertising, helping to grow income and make its business more diversified and resilient to market volatility. Since the restructuring into Alphabet, the company has acquired and operated various subsidiaries, broadening its revenue stream across different industries such as healthcare, life sciences, and robotics.

The technology giant’s Google segment includes internet products such as Google Search, Applications (Apps), DeepMind artificial intelligence, Google Ads, Google Maps, YouTube, Gmail, Android, and Chrome. The Google segment generates Alphabet’s revenue through its inter-connected applications, services, and hardware products. The Other Bets segment includes businesses such as Access, Nest, Verily, Google Fiber, Calico, and other initiatives.

Hedge Funds Sell

Hedge Funds adjusted their portfolios in the fourth quarter, and the aggregate 13F shares held decreased to approximately $49.9 million from $50.3 million, a slide of about 0.8%. Overall, 68 hedge funds created new positions, 252 added to an existing holding, 32 exited, and 260 reduced their stakes. In contrast, institutions increased their holdings by about 3.0% to $234.2 million from $227.3 million.

(WhaleWisdom)

Encouraging Earnings Projection

Analysts expect to see earnings rise through 2023, with earnings per share predicted at $112.94 by December 2022 and $134.15 by December 2023. Year-over-year estimated increases could bring revenue growth to approximately $345.1 billion by 2023, up from the anticipated revenue of $299.3 billion for 2022.

(WhaleWisdom)

Analysts Cut Price Targets

After Alphabet posted first-quarter results, many analysts reacted to missed earnings estimates by lowering price targets. When reporting first-quarter results, Alphabet also shared that it would increase its buyback program to $70 billion with continued investment in YouTube. The advertising market has been weaker, negatively impacting Alphabet’s Google segment, specifically YouTube.

Analyst Benjamin Black from Deutsche Bank lowered the firm’s price target to $2,900 from $3,150, rating shares as a Buy. Youssef Squali of Truist Securities fell the price target on Alphabet to $3,500 from $3,600. Raymond James analyst Aaron Kessler lowered the price target on Alphabet’s shares to $3,180 from $3,630 and shared optimism for long-term advertising revenue growth. Oppenheimer analyst Jason Helfstein maintained a price target of $3,290 and an Outperform rating on Alphabet’s shares. Analyst Scott Devitt of Stifel Institutional lowered the firm’s price target on Alphabet to $3,100 from $3,500 in response to first-quarter results and Alphabet management’s commentary about YouTube revenue being negatively impacted by external factors such as the Russia-Ukraine war. Stifel maintained a Buy rating on shares. Andy Hargreaves of KeyBanc held his firm’s price target on the stock and the Overweight rating. Hargreaves noted the resiliency of Alphabet’s stock as he left a price target of $3.08.

Cause for Optimism

Alphabet has a good history of growth and a strong presence in the tech sector. Though hedge funds were selling shares amidst market pullback, Alphabet outperformed the S&P 500. New investors may see lost momentum and be hesitant to acquire shares. However, lowered stock prices may also motivate acquiring shares, given optimistic future earnings estimates and Alphabet’s potential for long-term growth.

 

ServiceNow, Inc. (NOW) underperformed the S&P 500, seeing a loss of roughly 3.8% compared to the S&P 500’s loss of around 0.8% over the past year. Amidst market volatility, hedge funds actively sold ServiceNow’s shares, though the stock rose on the WhaleWisdom Heatmap to 14 from 16.

ServiceNow is a software as a service (SaaS) company specializing in enterprise cloud computing solutions and technical management support. The company offers a cloud computing platform to manage digital workflows for enterprise operations. The company supports customers within security, operations, human resources, customer service, and other business areas. Users can manage information technology projects, teams, and customer interactions through their applications and analyze data for trends and decision-making while protecting data through a network encryption system. Despite recent market fluctuations, ServiceNow’s performance tools continue to be widespread across industries.

Mixed Actions from Hedge Funds and Institutions

ServiceNow’s saw hedge funds selling in the fourth quarter, with the aggregate 13F shares held by hedge funds lowered to about 41.79 million from 41.81 million, a change of approximately 0.1%. Of the hedge funds, 40 created new positions, 106 added, 34 exited, and 106 reduced their holdings. In contrast to hedge funds, institutions were buying and increased their aggregate holdings by about 1.7% to approximately 174.0 million from 171.2 million.

(WhaleWisdom)

Positive Earnings Estimates

Analysts expect to see earnings increase in 2022 and 2023, bringing earnings per share to $9.36 by December 2023, up from an estimated $7.34 for December 2022. Estimates are also optimistic for revenue, with an anticipated rise by the end of 2022 to approximately $7.4 billion; this momentum may continue into 2023, with revenue estimated at $9.3 billion by December 2023. ServiceNow’s 13F metrics show a slight dip in stock value in 2022, compared to almost a decade of gradual revenue growth.

(WhaleWisdom)

Analysts React Conservatively to Q1 Report

Many analysts shared Outperform ratings after first-quarter earnings were announced. Reports of increased subscription revenue and the importance of digital business in today’s world are encouraging for ServiceNow. However, the software development industry has seen market fluctuations in recent months. Keith Bachman of BMO Capital Markets raised the firm’s price target on ServiceNow to $595 from $570, maintaining an Outperform rating on shares. Oppenheimer analyst Ray McDonough lowered the firm’s price target on ServiceNow to $600 from $660, keeping an Outperform rating on shares. Despite market volatility, McDonough sees positive demand for ServiceNow’s software. Morgan Stanley’s Keith Weiss lowered the firm’s price target to $745 from $810, factoring in higher interest rates. Weiss also shared that ServiceNow offers the opportunity of a good entry point into a “premier software growth enterprise.” Phil Winslow of Credit Suisse kept an Outperform rating on shares and set a price target of $700 for ServiceNow, lowered from $800 following recent quarterly results.

Favorable Long-term Outlook

ServiceNow has demonstrated a positive long-term trend over the past nine years. While hedge funds were selling in this volatile market and ServiceNow saw slower growth, analysts saw demand for the company’s software continuing. Optimistic earnings and revenue estimates from analysts also offer encouragement to patient investors.

Netflix, Inc. (NFLX) underperformed the S&P 500 as it faced slower growth. Netflix’s shares dropped roughly 57.6% as of April 2022, compared to the S&P 500’s gain of around 3.3% over the past year. The market saw stocks drop overall as the Federal Reserve discussed raising interest rates to subdue inflation. Hedge funds were actively selling Netflix’s shares, and the stock slid on the WhaleWisdom Heatmap to a ranking of sixteen from eight.

Netflix is an internet subscription streaming service and production company. It offers a library of movies and television episodes for customers to stream globally. Netflix also sends subscription DVDs by mail across the United States, though paid streaming memberships represent the bulk of Netflix’s revenue. Netflix obtains content from various production studios through revenue sharing agreements, fixed-fee licenses, and direct purchases. The streaming provider also offers original productions that have gained great appeal, especially during the coronavirus pandemic when consumers spent more time at home. However, despite the popularity of Netflix Originals, the company has faced increased competition, lost revenue from password sharing, and changing consumer habits as the pandemic begins to wind down; this resulted in a decline in subscribers and decelerated revenue growth.

Netflix recently shared plans to modify its subscription-only model to incorporate advertising and be more aggressive in responding to non-paying customers. One of the noteworthy reactions to Netflix’s subscription decline came from Pershing Square Capital Management. Pershing Square released a letter to investors last week explaining that the hedge fund had sold its entire stake in Netflix due to Netflix’s drop in subscribers and Pershing Square’s loss of confidence in predicting Netflix’s long-term financial prospects. While Netflix remains one of the largest streaming service providers globally, recent challenges and Pershing Square’s investment departure highlight the importance of the company implementing swift strategies regarding content, pricing, advertising incentives, and ensuring user accountability.

Hedge Funds Adjust Portfolios

Hedge funds were selling in the fourth quarter of 2021, and the aggregate 13F shares held decreased approximately 1.1% to about 71.6 million from 72.4 million. Of the hedge funds, 68 created new positions, 164 added to an existing holding, 44 exited, and 113 reduced their stakes. In contrast, institutions were buying and increased their aggregate holdings by about 1.0% to approximately 360.0 million from 356.2 million.

Encouraging Estimates

Analysts expect to see earnings rise to $10.97 per share by December 2022 and $12.62 by December 2023. Revenue estimates also offer encouragement, with predictions of approximately $35.8 billion by December 2023, up from an estimated $32.4 billion for December 2022. The 13F metrics through 2022 reflect a recent dip in stock price, while the trend for portfolio holdings demonstrated steady improvement before recently leveling off.

Analysts Lower Price Targets

Following first-quarter results, many analysts lowered their price targets on Netflix. Analyst Jason Bazinet of Citigroup lowered the firm’s price target on shares to $295 from $450 while maintaining a Buy rating. Bazinet also noted that the recent selloff of shares doesn’t appear to reflect Netflix’s business improvements. Edward Jones analyst David Heger recently downgraded Netflix to a Hold from a Buy rating due to post-pandemic subscriber losses and decreased expectations for future growth. Truist analyst Matthew Thornton kept a Hold rating on shares while lowering the firm’s price target to $300 from $409. Doug Anmuth of JPMorgan dropped the firm’s price target on Netflix to $300 from $605 and downgraded the company from a Neutral form Overweight rating. Anmuth forecast much lower 2022 net subscriber estimates and that beyond Netflix’s new lower stock price, there was not much to be excited about.

Optimism Beyond 2022

While Netflix has its share of business challenges, many analysts are still optimistic about its long-term growth. Earnings and revenue estimates through 2023 are favorable, and Netflix appears to have begun tackling revenue loss from password sharing and pursuing revenue opportunities from cheaper ad-supported subscription plans. Netflix’s lower price is worth investors’ attention with the understanding that the company’s rebound may require the patience of those interested in longer-term opportunities.

Visa, Inc. (V) has experienced market volatility in 2022, though the company outperformed the S&P 500 and hedge funds were buying. Visa rose by approximately 6.5% compared to the S&P 500’s gain of about 4.1% over the past year. However, the stock slid on the WhaleWisdom HeatMap to nineteen from ten.

Visa is a global financial services and technology company known for connecting consumers, businesses, banks, and governments through electronic payments and transfers. Visa’s services range from providing credit, debit, and prepaid card services to authorization and settlement services. The company makes money through interest and fees charged on these services, acting as a go-between between merchants and financial institutions. The company’s data processing operations generate the most significant portion of revenue.

Visa saw a boost in demand for its services in the first year of the coronavirus pandemic, as quarantined consumers relied heavily on using credit and debit cards to shop to remain contactless. As pandemic restrictions lifted, some consumers returned to using cash, impacting Visa’s revenue growth. However, many consumers have formed new buying habits and continue to prefer paying for things with credit and debit cards.

Hedge Funds Added to Holdings

Visa is a leader in payments and technology, and hedge funds actively bought stock in the fourth quarter. The aggregate 13F shares held by hedge funds increased to about 443.5 million from 428.0 million, an increase of approximately 3.6%. Of the hedge funds, 61 created new positions, 219 added to an existing one, 53 exited, and 184 reduced their stakes. Overall, institutions were selling and decreased their aggregate holdings by about 0.6% to approximately 1.55 billion from 1.56 billion. The 13F metrics from 2008 through early 2022 show that stock prices have steadily risen.

(WhaleWisdom)

Encouraging Earnings Projection

Analysts expect to see earnings rise in the next two years, with earnings per share predicted at $7.09 by September 2022 and $8.40 by September 2023. Year-over-year estimated increases could bring revenue growth to approximately 32.4 billion by September 2023, up from the anticipated revenue of 28.5 billion for 2022.

(WhaleWisdom)

Analysts Share a Range of Ratings

Analysts appear cautious about Visa, with fluctuations in ratings in all directions. AnnaMaria Andriotis of the Wall Street Journal shared that Visa will raise the fees that many large merchants pay to be able to accept consumers’ credit cards. Raising fees appears to be an overdue move delayed temporarily due to the pandemic. Analyst Ramsey El-Assal of Barclays lowered the firm’s price target to $260 from $265 while maintaining an Overweight rating on shares. Mizuho Securities analyst Dan Dolev responded to fourth-quarter results by raising his firm’s price target to $235 from $220. Dolev also maintained a Neutral rating on Visa’s shares. Moshe Katri of Wedbush Securities kept an Outperform rating on Visa and raised the firm’s price target to $270 from $240. Morgan Stanley analyst James Faucette kept an Overweight rating and raised the price target on Visa to $283 from $280.

Optimism Beyond 2022

Visa continues to have positive brand recognition in the global payment industry. Recent share fluctuation may make investors cautious, but earnings and revenue forecast through 2023 offer cause for optimism. Visa remains a stock to watch.