We issued an updated research report on Berkshire Hathaway Inc. BRK.B on Oct 14, 2015.
Berkshire Hathaway is a corporation with almost 90 subsidiaries that have operations ranging from ice-cream to insurance with Warren Buffett at the helm. Its economically sensitive non-insurance businesses – utilities and energy, along with manufacturing, service and retail – are performing favorably after enduring substantial earnings decline in the recent past due to economic weakness. As a result, the company has witnessed an increase in revenues.
Berkshire Hathaway’s Finance and Financial Products segment is also performing well after suffering from a soft housing market in the recent past. The company also boasts compelling inorganic growth that is expected to be accretive to earnings going ahead. A noteworthy initiative in this regard is the acquisition of auto dealer – Van Tuyl Group –and the launch of its automotive unit earlier this year.
Also, a strong capital position enables the company to continue its acquisition story. The insurer’s financial strength is also reflected by its decision to use half of its cash holdings to acquire the world’s leading aerospace industry supplier and one of the largest sources of American exports, Precision Castparts Corp. PCP.
However, uncertainty about Buffett’s successor, huge capital expenditure in BNSF (Berkshire’s most important non-insurance subsidiary) is draining the segment’s margin. Moreover, significant catastrophe exposure is another headwind.
Berkshire Hathaway currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the property and casualty insurance space are The Travelers Companies, Inc. TRV and Federated National Holding Company FNHC. Both stocks sport a Zacks Rank #1 (Strong Buy).
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