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Berkshire Hathaway (BRK.B) has drawn fresh attention after its recent share performance, with the stock last closing at $504.95, as investors weigh the company’s diversified operations and multi year return profile.
See our latest analysis for Berkshire Hathaway.
Recent share price moves have been relatively steady, with a 5.1% 1 month share price return and a small decline over 3 months. The 5 year total shareholder return of 99.5% reflects a much stronger longer term outcome, suggesting momentum has cooled recently, while longer horizon holders have still seen substantial value creation.
If Berkshire’s broad mix of businesses has you thinking about diversification, it could be a good moment to broaden your watchlist with our 19 top founder-led companies.
With Berkshire’s broad earnings base, strong multi year returns, and an estimated 40% intrinsic discount in the data, the real question is whether this points to an undervalued compounder or a market that is already pricing in future growth.
With Berkshire Hathaway last closing at $504.95 and the most followed narrative pointing to a fair value of $541.90, you are looking at a modest valuation gap that the market has not closed yet.
Valuing Berkshire via a standard DCF is difficult because it is a “Mutual Fund wrapped in a Railroad wrapped in an Insurance company.” To find the Intrinsic Floor, we must value the operating businesses and add the massive cash/stock portfolio.
Curious how that mix of operating earnings, insurance float and the investment portfolio comes together? The narrative leans on margin strength and a future earnings multiple that many investors would not immediately associate with a conglomerate like this.
Result: Fair Value of $541.90 (UNDERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, that upside view can crack if Berkshire’s insurance operations stumble, or if the cash and investment portfolio earn less than this narrative assumes.
Find out about the key risks to this Berkshire Hathaway narrative.
If this mix of risks and rewards feels finely balanced, it is worth checking the numbers yourself soon and forming your own stance, especially as our work highlights 2 key rewards and 2 important warning signs that could matter for long term holders.