Berkshire Hathaway with
The slow-moving stock could receive a decline on Monday from the stronger-than-expected profits and the growing pile of CEO Warren Buffett could use for investments or the long sought after elephant acquisition.
Berkshire's third-quarter operating profit reported on Saturday increased 14% to $ 7.9 billion from a year earlier. Earnings per share gained 15% to $ 4,812, exceeding the Bloomberg consensus estimate of $ 4,378. The aid to increase profits was higher investment income.
The company's cash grew in the third quarter, reaching $ 128 billion, up from $ 122 billion in the second quarter, despite a $ 10 billion investment in the quarter
8% preferred stock. Berkshire has agreed to make this investment to help Occidental (ticker: OXY) continue its controversial acquisition of Anadarko Petroleum.
Class A (BRK.A) shares, which ended Friday at $ 323,400, rose 5.7% this year, slightly behind
index that returned 24%. Berkshire has had one of its worst years compared to the overall market in the 54 Buffett years. Berkshire Class (BRK.B) 's more liquid stock ended at $ 215.83 on Friday.
The book value of Berkshire increased by 4% in the third quarter compared to the second quarter to about $ 243,500 per Class A share, calculated by Barron.
This means that Berkshire is now trading 1.3 times the book value on September 30, below the average of 1.4 to 1.5 times in recent years. Berkshire trades for about 21 times its estimated 2019 earnings – also down from its history. While Berkshire is trading above the market multiple of 18, its price / earnings ratio has been lowered to include only the $ 220 billion in dividends in its portfolio.
Probably the book value of Berkshire has increased since the end of the third quarter due to continued gains in the stock market, especially in
(AAPL), Berkshire's largest holding company, worth $ 71 billion. Apple's pledge has grown over $ 8 billion since September 30. Buffett emphasized book value as a benchmark in Berkshire, but many analysts and investors continue to track it and view it as an undervalued proxy for the company's intrinsic value.  Berkshire's share buyback was a modest $ 700 million in the third quarter, despite ample revenue and more money.
When Buffett and Vice President Charlie Munger were given expanded Berkshire share buybacks in the summer of 2018, many Berkshire fans hoped that the company, which had previously been a buyback, would be ramping up. will buy at least $ 10 billion a year or 2% of the outstanding shares. The company does not pay a dividend.
But the 89-year-old Buffett, who has never been interested in buying back in Berkshire, has acted cautiously, with the company buying $ 2.8 billion in the first three quarters of this year. Berkshire's slow buyback rate is ironic given Buffett is an enthusiastic supporter of aggressive stock buybacks in companies where Berkshire has large holdings, including Apple,
Bank of America
It seems that Berkshire has stepped up its redemption rate so far in the fourth quarter based on its number of shares on October 24, announced in its 10Q filing as approximately 1.629 billion Class A shares (with B shares converted in an equivalent amount of A). This implies a buyback of about $ 500 million after September 30.
Berkshire continues to buzz as investors ponder whether Buffett will ever find an acquisition of an elephant size of $ 50 billion or more. As Berkshire lags well on the stock market this year, despite its solid financial performance, its shares look attractive and are a good bet to outperform in the coming months.
Write to Andrew Barry at email@example.com