Berkshire Hathaway Shares Trade At $215,000...And Are Still Undervalued

Berkshire Hathaway Inc. (NYSE: BRK-A) reported its Q3 EPS ahead of expectations. Although the company continues to face earnings headwinds from BNSF Railway and its legacy industrial and manufacturing businesses, a recovery in earnings growth is likely in 2017, Barclays’ Jay Gelb said in a report.

Gelb maintained an Overweight rating on the company, with a price target of $249,000 per A share and $166 per B share. The earnings estimate for 2016 has been raised from $10,633 to $10,763 per A share or from $7.09 to $7.18 per B share.

Berkshire Hathaway reported its Q3 operating EPS at $2,951 per A share and $1.97 per B share, ahead of the expectations of $2,825 per A share and $1.88 per B share. The company’s major business segments as well as the Burlington Northern Railroad and the Utilities and Energy unit generated higher-than-anticipated earnings.

Undervalued Shares

“BRK shares are currently undervalued, in our view, at 1.31x book value; Berkshire plans on repurchasing a significant amount of shares up to 1.20x book value,” Gelb wrote. He believes significant acquisitions including that of Kraft Heinz Foods Co HNZ and Precision Castparts Corp. PCP would boost Berkshire Hathaway’s intrinsic value.

Berkshire currently has $85 billion of cash, which means the company has at least $60 billion that it can immediately deploy for acquisitions, the analyst noted.

Warren Buffett has reportedly identified Berkshire Hathaway as his worst investment ever.

In a letter to Berkshire Hathaway shareholders, the famed investor explained that when he first acquired the company’s stock in the 1960s, he was well aware of the (then textile) company’s problems, but still decided to buy them because they looked “cheap.” This was as a "monumentally stupid decision."

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