Berkshire Hathaway (NYSE: BRK.B)
Quality Value Investing Research Report | $BRK.B Updated Coverage | May 2024
Summary:
Berkshire Hathaway, Inc. is a non-dividend-paying large-cap stock in the financials sector’s multi-sector holdings industry.
The company has consistently solid financial performance, with double-digit revenue growth and competitive returns on equity and invested capital.
The stock price trades at a fair to discounted valuation, with low downside risks supported by predictable long-term performance.
QVI maintains its coverage rating of Berkshire Hathaway in the Concentrated Real-Time Stock Picks as a result of this updated research report.
When referencing this research report, access your Quality Value Investing (QVI) Glossary of Investing Terms and Metric Targets and Research Report Format Guide. Unless noted, all data presented is sourced from Seeking Alpha Premium as of the market close on May 8, 2024, and intended for illustration only.
In this updated coverage QVI Research Report, we’ll reexamine the Concentrated Real-Time Stock Picks financials’ sector holding, Berkshire Hathaway, Inc., to see if it continues to meet Quality Value Investing’s investment criteria based on our checklist analysis of the business’s current wealth and its stock’s present value.
Berkshire Hathaway: Company Current Wealth
Value Proposition
Berkshire Hathaway, Inc. (BRK.B) is a non-dividend-paying large-cap stock in the financials sector’s multi-sector holdings industry. It was added to the QVI Real-Time Stock Picks on February 9, 2022, at a $322.38 cost basis per share.
Berkshire Hathaway Inc., through its subsidiaries, engages in the insurance, freight rail transportation, and utility businesses worldwide. The company provides property, casualty, life, accident, and health insurance and reinsurance; and operates railroad systems in North America. It also generates, transmits, stores, and distributes electricity from natural gas, coal, wind, solar, hydroelectric, nuclear, and geothermal sources; operates natural gas distribution and storage facilities, interstate pipelines, liquefied natural gas facilities, and compressor and meter stations; and holds interest in coal mining assets.
In addition, the company manufactures boxed chocolates and other confectionery products; specialty chemicals, metal cutting tools, and components for aerospace and power generation applications; flooring products; insulation, roofing, and engineered products; building and engineered components; paints and coatings; and bricks and masonry products, as well as offers manufactured and site-built home construction, and related lending and financial services.
Further, it provides recreational vehicles, apparel and footwear products, jewelry, and custom picture framing products, as well as alkaline batteries; castings, forgings, fasteners/fastener systems, aerostructures, and precision components; and cobalt, nickel, and titanium alloys. Additionally, the company distributes televisions and information, franchises and services quick service restaurants, distributes electronic components, and offers logistics services, grocery and foodservice distribution services, and professional aviation training and shared aircraft ownership programs. It also retails automobiles; furniture, bedding, and accessories; household appliances, electronics, and computers; jewelry, watches, crystal, china, stemware, flatware, gifts, and collectibles; kitchenware; and motorcycle clothing and equipment.
Berkshire Hathaway was incorporated in 1998 and is headquartered in Omaha, Nebraska, USA.
Economic Moat
Morningstar assigns Berkshire Hathaway a wide moat rating based on the company’s multi-branding strength.
QVI’s Value Proposition Elevator Pitch for BRK.B:
Berkshire Hathaway is the Warren Buffett-built conglomerate of diversified businesses wholly owned or through its massive stock portfolio, and, thus, better than an index fund because of its emphasis on quality and value.
QVI’s value proposition rating for Berkshire Hathaway: Bullish.
Returns on Management
Revenue Growth and Net Profit Margin
Per the chart below, Berkshire Hathaway’s trailing three-year annualized revenue growth was mid-double-digits and far outperformed the financials sector’s +4.01% median growth. The company’s topline growth was +16.55% for the most recently reported twelve months.
Farther down the income statement, Berkshire Hathaway’s three-year, mid-double-digit net profit margin aligned with the sector’s median net margin of +23.01%.
Returns on Equity and Invested Capital
Berkshire Hathaway’s senior management produced a three-year double-digit return on equity, or ROE, just above QVI’s targeted threshold and higher than the sector’s median ROE of +10.51%.
Stock buyback programs often elevate ROE. For example, Berkshire Hathaway bought back $2.3 billion of its stock in the first quarter of this year and $9.2 billion in 2023.
Berkshire Hathaway’s three-year return on invested capital, or ROIC, was just above QVI’s threshold and ahead of the sector’s median ROIC of +6.79%. Moreover, BRK.B’s ROIC exceeded its weighted average cost of capital, or WACC, of 8.80%, demonstrating that its senior executives are competent capital allocators. (Source of WACC: GuruFocus)
QVI’s business fundamentals rating for Berkshire Hathaway.: Bullish.
Next, we’ll look at the company’s returns on management chart, enterprise downsize risks, the stock price’s present value, share price downside risks, and the investment thesis, each exclusive to Quality Value Investing’s premium (paying) subscribers.
Disclosure: At the time of this writing, I/we had a beneficial long position of BRK.B common shares in our family portfolio. I wrote this report myself, and it expresses my own opinions. I am not receiving compensation for it other than from Substack paid subscriptions. I have no business relationship with any company whose stock is mentioned in this post.
Additional Disclosure: Quality Value Investing by David J. Waldron’s primary ticker research reports are for informational purposes only. The accuracy of the data cannot be guaranteed. Narrative and analytics are impersonal, i.e., not tailored to individual needs nor intended for portfolio construction beyond his family portfolio, which is presented solely for educational purposes. David is an individual investor and author, not an investment adviser. Readers should always engage in their own research or due diligence and consider (as appropriate) consulting a fee-only certified financial planner, licensed discount broker/dealer, flat fee registered investment adviser, certified public accountant, or specialized attorney before making any investment, income tax, or estate planning decisions.
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