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- Manlobbi
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤
No. of Recommendations: 5
Timeliness goes from 1 to 3. Technical goes from 1 to 3. Safety remains at 1. "" Berkshire Hathaway's earnings are
likely to decline on a year-over-year
basis in 2023 against a very tough
comparison. Looking at it with more
granularity, operating earnings per share
clocked in at $3.71 during the March quarter, which represented a nearly 17% advance on a year-over-year basis. Insurance
operations were particularly strong with
underwriting and investment income comparisons up sharply from last year's tallies. This doesn't come as much of a surprise to us, given that broader conditions
in the P/C insurance market have been
generally favorable of late, despite an uptick in catastrophes across some segments
and geographic regions. However, it
should be noted that the company will be
up against continued tough comparisons
for the remainder of 2023, particularly
during the second quarter.
We believe that results will be roughly
flat in 2024. The outlook for the insurance
market is generally favorable looking
ahead to next year, while the company's
other operating segments ought to perform
well, as long as the economy holds up. ""
No. of Recommendations: 26
I have always been rather bemused by their reports on Berkshire.
This one is typical; they report the 5 year rate of growth of book per share at 11.0%, yet project the next 3-5 years at 6.0%. (pretty sad given that's not much above inflation)
Every year about the same inexplicable gap, so their forward growth and stock return forecasts have been huge underestimates for decades.
(I am reminded of that cliche definition of insanity...)
Their earnings estimates for calendar 2023 and 2024 are both lower than the 2022 figure, though of course year to year variability makes that a mug's game.
Their ROE estimate for 2023 and 2024 is 4.5%, and for 2026-2028 is 4.0%.
Why such perennial gloom?
Their in-house process requires them not to take any account of the benefit of any future acquisitions,
so the forecast for earnings growth, book growth, and ROE are always low because they always implicitly assume that the cash will simply stack up.
That makes sense for the average firm, but, based on the results, has never worked for their Berkshire analysis.
Some stuff seems sensible.
Financial strength: A++
Stock price stability: 100/100 (this is a relative measure)
Price growth persistence: 95/100
Jim
No. of Recommendations: 3
"" Berkshire Hathaway's earnings are
likely to decline on a year-over-year
basis in 2023 against a very tough
comparison.
I don't believe this is consistent with what Buffet stated. Buffet stated, I believe, that most businesses will experience a decline in operating earnings (not all), however, that higher investment income (part of operating income), will dwarf these declines and that overall operating income will be higher.
No. of Recommendations: 11
Back in the late 1990's and early 2000's Value Line would have Cisco at 150 times earnings with expected growth of 25% annually and Intel at 70 times earnings not far behind at 20% now-and-forevermore. Berkshire? 6%! Six percent for years, and years, and years was the norm for Berkshire according to Value Line.
No. of Recommendations: 1
I don't believe this is consistent with what Buffet stated. Buffet stated, I believe, that most businesses will experience a decline in operating earnings (not all), however, that higher investment income (part of operating income), will dwarf these declines and that overall operating income will be higher.
This is correct. *unless a large hurricane hits Florida*
No. of Recommendations: 12
Back in the late 1990's and early 2000's Value Line would have Cisco at 150 times earnings with expected growth of 25% annually and Intel at 70 times earnings not far behind at 20% now-and-forevermore. Berkshire? 6%! Six percent for years, and years, and years was the norm for Berkshire according to Value Line.
The valuation levels they predict are for a different reason.
I think they find a good yardstick value metric for each firm (book, cash flow, dividends, earnings, whatever), and look at the 10 year average multiple. Maybe more than 10 years, but it's backward looking.
If a firm has been expensive for a long time, they implicitly expect it to remain so, and vice versa.
That methodology is consistent, and probably useful more often than it's crazy.
Their "Average Annual P/E Ratio" field was 9.60 for Microsoft a few years back, and now it's 32.21.
If you're using that data source as an expectation of "normal", you need to be pretty flexible about your expectations.
Jim
No. of Recommendations: 2
What I was referring to is that if you invested in Cisco and Intel during this period it is going to be 30 plus years - just a wild guess - before you break even with dividends included. Cisco was $82 and Intel $75.
