By Hugh Son
June 29, 2010, 2:15 PM EDT
June 29 (Bloomberg) -- Berkshire Hathaway Inc., the firm run by billionaire Warren Buffett, is a “buy” because its earnings will grow as the U.S. economy recovers, Goldman Sachs Group Inc. said.
Berkshire, which owns railroad Burlington Northern Santa Fe and auto insurer Geico Corp. and has stakes in firms including credit-card lender American Express Co., may rise about 25 percent in 12 months, analysts led by Christopher Neczypor said today in a research note. The note initiated coverage in the Omaha, Nebraska-based company.
“The non-insurance entities are tied to GDP growth and to a lesser extent, industrial production,” Neczypor wrote. “As the economy continues to emerge from its cyclical downturn, we would expect earnings to grow at a faster rate than what appears to be currently discounted in the stock.”
Buffett, the 79-year-old chairman of Berkshire, executed takeovers and stock picks to transform his firm over four decades from a failing textile mill into a seller of bricks, electric power and hurricane insurance with a market value of almost $200 billion. He called his $27 billion purchase of Burlington Northern, completed in February, an “all-in wager” on the U.S. economy.
“Post the acquisition of Burlington Northern, we estimate close to half of Berkshire’s intrinsic value will be derived from operating entities, as opposed to securities investments,” Neczypor wrote. This “reduces the long-term reliance on senior management’s equity investing decisions, and provides greater clarity into the source of future value for the company.”
Berkshire’s Class A shares declined $688 to $120,512 at 1:57 p.m. today in New York Stock Exchange composite trading, and have risen more than 21 percent this year.
--Editors: Dan Reichl, Dan Kraut
Share Investor Blog - Stockmarket & Business commentary
Discuss this topic @ Share Investor Forum - Register free
Download the 2009 Warren Buffett Letter & 2009 Annual Report to Berkshire Hathaway Shareholders
Download the 1977 - 2009 Warren Buffett Letter's to Berkshire Hathaway Shareholders
Recommended Amazon Reading
 | The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) by Benjamin Graham Buy new: $14.95 / Used from: $10.10 Usually ships in 24 hours |
 | The Snowball: Warren Buffett and the Business of Life by Alice Schroeder Buy new: $11.00 / Used from: $6.00 Usually ships in 24 hours |
No comments:
Post a Comment