3 Reasons to Buy Berkshire Hathaway Stock
I am quoted in a Kiplinger’s article: “3 Reasons (Other Than Warren Buffett) to Buy Berkshire Stock”
Conditions are ripe for Berkshire’s so-called Powerhouse Six non-insurance businesses to perform well in 2017, says David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business who studies Buffett and is a Berkshire shareholder.
“The ‘Powerhouse Six,’ which consists of its BNSF railroad [Burlington Northern Santa Fe], Berkshire Hathaway Energy, Marmon, Lubrizol, IMC and Precision Castparts, represent the bulk of its non-insurance earnings,” Kass says. “BNSF results should improve in 2017 with increasing rail volumes. Manufacturing operations should also improve along with the energy sector and the improving economy in 2017.”
Additional reasons why Berkshire Hathaway might reasonably be considered undervalued today:
1) the multi-decade average price-to-book is approximately 1.65X. At such a valuation today, the B-class shares should sell in the approximate range of $180.
2) related to your assertion about the Powerhouse Six: viewing the operating subsidiaries as a separate and distinct business from the insurance/investment business, it is clear that the capitalized earnings of the operating subsidiaries are undervalued today in relation to the broader market. And BRK’s subsidiaries generally have the stronger business metrics when stacked up against the same peer group.