CFRA Targets $472 for Berkshire B, Eyes 18% Upside

Key Takeaway

• CFRA sets a $472 price target on Berkshire Hathaway's Class B shares, seeing nearly an 18% upside ahead of the annual meeting.
• Speculation around Berkshire's portfolio adjustments, including the sale of Apple shares and undisclosed bank stock investments.
• Financial performance aligns with S&P 500; focus on aggressive share buybacks by major holdings like Apple.

Berkshire Hathaway's Anticipated Meeting

Before the much-anticipated annual meeting of Berkshire Hathaway, set to take place in Omaha, Nebraska, CFRA has highlighted the potential undervaluation of Berkshire's Class B shares. Analyst Catherine Seifert points to expected improvements in claim trends at GEICO and strong reinsurance results as key drivers for the stock's potential outperformance. Seifert's analysis sets a $472 price target on the Class B shares, indicating nearly an 18% upside from the current levels. The meeting, often referred to as “Woodstock for Capitalists,” attracts thousands of investors eager to hear from Warren Buffett, the 93-year-old chairman. Topics likely to be covered include succession planning, especially in light of Charlie Munger’s recent passing, and strategies concerning Geico, energy, and acquisitions. Shareholder proposals, mainly focusing on climate change and diversity, are expected to be presented, though their passage is considered unlikely.

Portfolio Adjustments and Speculations

Investors and followers of Warren Buffett are keen to understand the rationale behind recent adjustments in Berkshire Hathaway's massive equity portfolio, particularly the sale of about 10 million Apple shares. Despite this sale representing just 1% of Berkshire's stake in Apple, it has raised eyebrows given Buffett's long-standing favoritism towards the tech giant. Speculation abounds that the trimming could be due to the portfolio's heavy weighting in Apple or actions by Buffett's investment deputies to fund other purchases. Additionally, there's anticipation around the disclosure of a mystery bank stock that Berkshire has been accumulating, a move kept confidential in recent SEC filings. The meeting might also shed light on Berkshire's aggressive investment in Liberty Media’s tracking stock for SiriusXM and the conglomerate's position on Paramount amid ongoing merger talks and leadership changes at the entertainment company.

Financial Performance and Market Movements

Berkshire Hathaway's financial performance and strategic market movements remain a focal point, with the company's A shares showing a roughly 23% increase over the past year, aligning closely with the S&P 500's performance. The conglomerate's top five holdings by value include major names like Apple, Bank of America, American Express, Coca-Cola, and Chevron. Notably, Apple recently announced a significant buyback plan of $110 billion, despite a revenue dip of 4%. This move, along with other major repurchasers like Alphabet and General Motors, highlights a trend of aggressive share buybacks in the market. Meanwhile, other companies like Hershey and CBRE are also in focus for their upcoming financial reports, with Hershey grappling with the high cost of cocoa and CBRE maintaining a steady performance.

Street Views

• Catherine Seifert, CFRA (Bullish on Berkshire Hathaway):

  "CFRA believes Berkshire Class B shares are undervalued versus historical averages, and we expect improved claim trends at GEICO and strong reinsurance results will provide the shares with a catalyst for continued outperformance."