Posted on May 16th, 2022
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.
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.