Berkshire Hathaway shares near all-time highs, but concerns remain | Wilnesh News
Shares in Berkshire Hathaway are near record highs ahead of the group’s annual shareholder meeting, but some concerns are troubling analysts. Both Berkshire’s Class A and Class B shares have outperformed the market this year. In March, the company’s Class A shares reached an all-time closing high of $634,440. Thursday’s closing price was an eye-popping $606,413.44, up more than 11% year-to-date. Meanwhile, Class B shares were last trading at about $400 a share, down from a record closing price of $420.52 set in March. These stocks are up about 12% in 2024. Berkshire’s earnings were driven in part by the group’s core insurance business, which surged last year given the industry’s strong pricing power. Fourth-quarter insurance underwriting operating profit increased 430% year-on-year to US$848 million. Insurance investment income also rose. BRK.B All Mountain Berkshire Hathaway Class B Stock But that doesn’t mean the stock isn’t without its problems. Notably, the company’s energy and rail businesses performed weakly last year, and investors are expected to continue to monitor these areas for negative surprises. Some investors pointed to Berkshire Hathaway’s recent spate of high-profile lawsuits, a development one analyst called “out of character for the group.” “Companies have seen increased litigation risk,” said Cathy Seifert, senior vice president at CFRA Research. She added, “I think the recent situation may have forced them into a situation that they didn’t want to be in.” Berkshire Hathaway Energy company Warren Buffett’s Berkshire Hathaway has been battling several high-profile lawsuits in recent months, including this year with the Haslam family over how Berkshire valued truck stops Billion-dollar lawsuit against giant Pilot Travel Centers settled. But what investors will be watching closely are continued wildfire-related losses in Oregon and Northern California. Last year, for example, an Oregon jury found Berkshire Hathaway subsidiary PacifiCorp liable for a $1.6 billion class-action lawsuit stemming from the state’s 2020 wildfires. continues, especially as the frequency of forest fires increases. “It will be many years before we know the final tally of BHE wildfire losses and can make informed decisions about the desirability of future investments in the vulnerable West Country,” he wrote. Wildfire losses, Edward Jones analyst James Shanahan said That could be a considerable headwind for Berkshire Hathaway Energy, which he noted already accounts for about 10% of the group’s revenue and profits. “I think these wildfire losses could be quite substantial and could be a significant earnings headwind for the energy business over the next few years,” he said. Still, CFRA’s Seifert has a buy rating on the stock, saying that considering Polk With the size and scale of summer, wildfire risks are “ultimately manageable.” Meanwhile, Seifert expects “stability” in the rail industry, which showed some weakness in wage negotiations last year. Edward Jones’ Shanahan said Geico is another potential area worth monitoring. The auto insurance company, considered Buffett’s “favorite child,” reported that it will be profitable in 2023 and could benefit from a continued tailwind in the insurance business. But analysts are worried that the company will lose market share to competitors such as Progressive, which deserves attention. What’s more, he said much of Geico’s improvement in underwriting margins has to do with cuts in advertising spending and a reduction in headcount. “I think it’s a very fair question for the conference,” Shanahan said. “I would expect a question to be asked about the Geico unit, about how much we expect advertising spending to increase, which will again be a headwind to Geico’s underwriting margins,” Shanahan said. “Historically, if they invest in policy acquisitions, , which will have an impact on near-term loss costs.” Bullish Conditions Despite this, analysts remain optimistic about Berkshire’s prospects. CFRA’s Seifert, for example, has a buy rating on the company. Her 12-month price target of $472 means Berkshire shares could rise about 18% from Thursday’s closing price of $400.60 a share. She noted that many of Berkshire’s businesses could benefit from the Fed’s interest rate cuts. “I think it’s safe to say interest rates are stable,” Seifert said. “And, in an environment of stable to falling interest rates, many of Berkshire Hathaway’s economically sensitive businesses should do quite well.” Shanahan, on the other hand, has maintained a hold on Berkshire since September. has ratings and said he was looking for a more attractive entry point to return to Berkshire after the company’s outperformance. “We like the company and we may return to the name at some point, especially if we want to reposition one of our strategies in a more defensive manner, but it remains a hold,” Shanahan said. rating. Ultimately, however, when it comes to Berkshire Hathaway’s future, investors expect the group to be well-positioned due to its attractive and diversified business portfolio, strong balance sheet and cash reserves, and corporate nurturing management culture. “I think the future of Berkshire Hathaway is very bright,” Shanahan said. This year’s Capitalist Woodstock Music Festival in Omaha, Nebraska will be exclusively broadcast and live broadcast by CNBC. Our special coverage will begin Saturday at 9:30 a.m. ET.
