Source: Wall Street See
Author: Pan Lingfei
Despite the potential headwinds in terms of returns, Berkshire Hathaway is still considered a safe haven in the volatile market. However, it remains uncertain whether it can continue to outperform the s&p 500 index in the current overvaluation. The succession issue of Warren Buffett also adds uncertainty to the company's future.
Despite Warren Buffett's cautious attitude towards Berkshire Hathaway's stocks and the overall market, investors continue to buy a large amount of the company's stocks, pushing its valuation to a multi-year high.
On Wednesday, $Berkshire Hathaway-A (BRK.A.US)$ The closing price of the stock was $715,778, with little change, while the Class B shares rose 0.4% to $478.57, both hitting new highs. Since the company announced strong second-quarter financial results in early August, Berkshire Hathaway's stock price has risen more than 10%, with a gain of more than 30% this year, far exceeding the S&P 500 index's total return of 17%.
Berkshire Hathaway's market value surpassed $1 trillion last week, just before Warren Buffett's 94th birthday. The current stock price is equivalent to 1.7 times its book value as of June 30, 24 times the expected earnings per share in 2024, both higher than the average level of the past 10 years.
Despite the enthusiasm of investors, Buffett appears indifferent to share buybacks. The company only repurchased $0.345 billion worth of stocks in the second quarter, far below the $2.6 billion repurchased in the first quarter. This is the lowest quarterly buyback amount in five years. In the first few weeks of July, the company did not repurchase any stocks.
Buffett is also cautious about the overall stock market. In the first half of this year, Berkshire Hathaway sold about $93 billion worth of stocks, mainly reducing its holdings in Apple. Barron's magazine estimates that the current amount could be close to $100 billion.
Edward Jones analyst Jim Shanahan has a 'hold' rating on the stock, believing that the current stock price reflects the company's positive factors. UBS Group's Brian Meredith and KBW's Meyer Shields have target prices of $759,000 and $715,000 per Class A share, respectively, with 'buy' and 'market perform' ratings.
Despite potential headwinds such as a potential decrease in interest rates that could affect the return on the company's huge cash reserves, Berkshire Hathaway is still seen as a safe haven in a turbulent market. The company holds a significant position in property and casualty insurance and has recently performed well due to strong pricing in the industry.
Buffett emphasizes the intrinsic value of the company rather than book value. However, book value has been supporting the performance of the company's stocks since Buffett took over in 1965. Assuming the current stock price remains unchanged, it is expected that Berkshire Hathaway's book value will increase by over 2% as of September 30th, reaching approximately $430,000 per Class A share.
Despite Berkshire Hathaway's outstanding performance in the recent past, there are doubts about whether it can continue to outperform the S&P 500 index under the current high valuation. The succession question of Buffett also adds uncertainty to the company's future.
Editor/rice