Berkshire Hathaway is an American multinational conglomerate, founded by the magnate, investor and philanthropist, Warren Buffet. The Berkshire Hathaway stock (NYSE: BRK.B) has done exceptionally well the past few years. Does it have a bright future?
The Warren Buffet Strategy
The conglomerate was founded in the early days of 1839, with renowned investor Warren Buffet has built up Berkshire Hathaway by purchasing stock in undervalued companies, which were predominantly insurance companies, to then fully acquiring many of those businesses. Over the following years, the company took over many businesses from an array of industries.
The Berkshire Empire
The conglomerate is not a very popular household name, but is a giant in the market. The established firm fully owns 62 businesses from completely different industries; food & beverage, furniture, aviation, real estate and even batteries. Notably, Kraft Heinz, Dairy Queen, Business Wire, Duracell and GEICO are all pillars of the Berkshire empire. The success of each business feeds into the huge valuation of Berkshire Hathaway. Today, it’s the 7th most valuable company in the world with regards to market capitalization, which is valued at over $700 billion.
Latest Quarterly Results
The company enjoyed another double-digit escalation in operating profit, racking up $6.47 billion in operating income, which is 18% more than the $5.48 billion figure recorded the same time one year ago. Its railroad, utilities and energy businesses were the champions of the quarter, as they rebounded strongly from the slumps of COVID-19. Its cash pile in the quarter has also reached a record $149.2 billion, which is $5 billion more than the previous quarter. Berkshire Hathaway, however noted that its earnings for the quarter, amounting to $10.3 billion, were 60% less than the figure generated one year ago.
When looking at Berkshire Hathaway from a fundamental perspective, the company has a Return on Assets of 9.34%, which is better than 84% of companies in the same industry. The American behemoth enjoys an impressive profit margin of 32%, which is almost double the industry average of 16.7%. This all translates into excellent profitability.
Onto growth, the company’s EPS or earnings per share, has risen by 25% over the past year. Analysts are forecasting that revenue and EPS will grow over the next 5 years, as current growth is accelerating in a rapid manner.
From a technical view, the short-term trend of Berkshire Hathaway’s Class B stock is neutral, but exhibits positive & solid long-term direction. In fact, the stock has outperformed 92% of all other stocks in the same industry; the diversified financial services spectrum. As viewed by TradingView, the current stock price of $316, is trading between a lower support level of $272, an upper one at $295, and a resistance mark at $324. This is the highest price tag ever reached by the stock.
The future of Berkshire Hathaway revolves around technology and innovation. The company has already increased its existing stake in established corporations, like Apple and Amazon, and has also began investing in younger companies, including software-focused Snowflake and Brazilian payments company, StoneCo.
Looking into its fundamentals, technicals and future outlook, analysts from Wall Street Journal expect the company’s share price to jump to $344 as an average in the near future, $354 as a high estimate and $327 as a low estimation. Also, renowned Swiss investment bank, UBS, believes that the Berkshire stock will soon hit the $329 share price.
Sources: BerkshireHathaway.com – Wall Street Journal – CNBC – Investors – NPR – TradingView
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