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BRK.B Stock Trading In Line With the Industry at 1.61X: Buy or Hold?
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Berkshire Hathaway Inc. (BRK.B - Free Report) shares are trading in line with the Zacks Property and Casualty Insurance industry. Its price-to-book value of 1.61X is lower than the broader sector’s 3.81X and Zacks S&P 500 composite’s 8.68X.
This insurance behemoth has a market capitalization of $982.6 billion. The average volume of shares traded in the last three months was 4.3 million.
The stock remains attractively valued compared with other insurers like The Progressive Corporation (PGR - Free Report) and The Allstate Corporation (ALL - Free Report) .
Berkshire shares have gained 9.9% in the past three months, underperforming its industry. However, BRK.B stock has outperformed its sector and Zacks S&P 500 composite’s return in the same time frame.
BRK.B vs Industry, Sector & S&P 500 in 3-Months
Image Source: Zacks Investment Research
BRK.B Trading Above 50-Day Moving Average
Berkshire shares are trading well above the 50-day moving average, indicating a bullish trend. Shares are trading near the high end of its 52-week range.
BRK.B Price Movement vs. 50-Day Moving Average
Image Source: Zacks Investment Research
Factors Favoring Berkshire
Berkshire Hathaway is a conglomerate with more than 90 subsidiaries engaged in diverse business activities, with insurance being the primary contributor to its top line. About 40% of Berkshire’s operating earnings came from its insurance underwriting and insurance investment subsidiaries in 2023. Other operations, including utilities and energy, and manufacturing, service and retail, combined accounted for the remaining 60%.
The magnitude of catastrophe losses affects the underwriting profitability of Berkshire Hathaway. The insurer experienced no significant catastrophe events in the first six months of 2024. In contrast, it had incurred about $450 million in losses in the year-ago period. Prudent underwriting standards help the company withstand the blow from catastrophe losses.
In its recently concluded FOMC meeting, the Federal Reserve cut the interest rate by 50 basis points. Insurers are direct beneficiaries of a rising rate environment. They invest a portion of their premiums and a low-rate environment could weigh on investment results.
Per the Federal Reserve issued FOMC statement, “Recent indicators suggest that economic activity has continued to expand at a solid pace.” U.S. GDP grew 3% in the second quarter after growth slowed to 1.4% in the first quarter. Thus, Berkshire’s utilities and energy, and manufacturing, service and retail units are poised to benefit from an improving economy.
With a huge cash hoard, Berkshire Hathaway acquires entities or adds stakes of companies that have consistent earning power and generate impressive returns on equity. While big acquisitions open up more business opportunities for the company, bolt-on acquisitions enhance the earnings of the existing business.
This insurer distributes wealth to shareholders through share buybacks. Berkshire Hathaway bought back shares worth $2.9 billion in the first half of 2024.
Berkshire’s Return on Capital
Return on equity in the trailing 12 months was 7.4%, underperforming the industry average of 8%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders. It's noteworthy that though BRK.B’s ROE lags behind the industry average, the company has successfully improved the same.
Image Source: Zacks Investment Research
Its return on invested capital (ROIC) has increased every year since 2020. This reflects BRK.B’s efficiency in utilizing funds to generate income. However, ROIC in the trailing 12 months was 5.8%, lower than the industry average of 6.1%.
Image Source: Zacks Investment Research
Optimistic Analyst Sentiment
Two of the three analysts covering the stock have raised estimates for 2024 and 2025 over the past 30 days. The Zacks Consensus Estimate for 2024 implies a 14.8% year-over-year increase, while the same for 2025 suggests a 1.4% increase.
The consensus estimate for 2024 and 2025 has moved 0.6% and 0.7% north, respectively, in the past 30 days.
Image Source: Zacks Investment Research
Average Target Price for BRK.B Suggests a Solid Upside
Based on short-term price targets offered by 2 analysts, the Zacks average price target is at $477 per share. The average suggests a potential 4..8% upside from Friday’s closing price of $455.31.
Image Source: Zacks Investment Research
Conclusion
Holding shares of Berkshire Hathaway renders dynamism to shareholders’ portfolios. Also, the company has Warren Buffett at its helm, who has been creating tremendous value for shareholders over nearly six decades with his unique skills.
Berkshire shares have been trading at a premium for quite some time. Given that its shares are now trading in line with the industry average, it is wise to add this Zacks Rank #2 (Buy) company to your portfolio.
Image: Shutterstock
BRK.B Stock Trading In Line With the Industry at 1.61X: Buy or Hold?
Berkshire Hathaway Inc. (BRK.B - Free Report) shares are trading in line with the Zacks Property and Casualty Insurance industry. Its price-to-book value of 1.61X is lower than the broader sector’s 3.81X and Zacks S&P 500 composite’s 8.68X.
This insurance behemoth has a market capitalization of $982.6 billion. The average volume of shares traded in the last three months was 4.3 million.
The stock remains attractively valued compared with other insurers like The Progressive Corporation (PGR - Free Report) and The Allstate Corporation (ALL - Free Report) .
Berkshire shares have gained 9.9% in the past three months, underperforming its industry. However, BRK.B stock has outperformed its sector and Zacks S&P 500 composite’s return in the same time frame.
BRK.B vs Industry, Sector & S&P 500 in 3-Months
Image Source: Zacks Investment Research
BRK.B Trading Above 50-Day Moving Average
Berkshire shares are trading well above the 50-day moving average, indicating a bullish trend. Shares are trading near the high end of its 52-week range.
BRK.B Price Movement vs. 50-Day Moving Average
Image Source: Zacks Investment Research
Factors Favoring Berkshire
Berkshire Hathaway is a conglomerate with more than 90 subsidiaries engaged in diverse business activities, with insurance being the primary contributor to its top line. About 40% of Berkshire’s operating earnings came from its insurance underwriting and insurance investment subsidiaries in 2023. Other operations, including utilities and energy, and manufacturing, service and retail, combined accounted for the remaining 60%.
The magnitude of catastrophe losses affects the underwriting profitability of Berkshire Hathaway. The insurer experienced no significant catastrophe events in the first six months of 2024. In contrast, it had incurred about $450 million in losses in the year-ago period. Prudent underwriting standards help the company withstand the blow from catastrophe losses.
In its recently concluded FOMC meeting, the Federal Reserve cut the interest rate by 50 basis points. Insurers are direct beneficiaries of a rising rate environment. They invest a portion of their premiums and a low-rate environment could weigh on investment results.
Per the Federal Reserve issued FOMC statement, “Recent indicators suggest that economic activity has continued to expand at a solid pace.” U.S. GDP grew 3% in the second quarter after growth slowed to 1.4% in the first quarter. Thus, Berkshire’s utilities and energy, and manufacturing, service and retail units are poised to benefit from an improving economy.
With a huge cash hoard, Berkshire Hathaway acquires entities or adds stakes of companies that have consistent earning power and generate impressive returns on equity. While big acquisitions open up more business opportunities for the company, bolt-on acquisitions enhance the earnings of the existing business.
This insurer distributes wealth to shareholders through share buybacks. Berkshire Hathaway bought back shares worth $2.9 billion in the first half of 2024.
Berkshire’s Return on Capital
Return on equity in the trailing 12 months was 7.4%, underperforming the industry average of 8%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders. It's noteworthy that though BRK.B’s ROE lags behind the industry average, the company has successfully improved the same.
Image Source: Zacks Investment Research
Its return on invested capital (ROIC) has increased every year since 2020. This reflects BRK.B’s efficiency in utilizing funds to generate income. However, ROIC in the trailing 12 months was 5.8%, lower than the industry average of 6.1%.
Image Source: Zacks Investment Research
Optimistic Analyst Sentiment
Two of the three analysts covering the stock have raised estimates for 2024 and 2025 over the past 30 days. The Zacks Consensus Estimate for 2024 implies a 14.8% year-over-year increase, while the same for 2025 suggests a 1.4% increase.
The consensus estimate for 2024 and 2025 has moved 0.6% and 0.7% north, respectively, in the past 30 days.
Image Source: Zacks Investment Research
Average Target Price for BRK.B Suggests a Solid Upside
Based on short-term price targets offered by 2 analysts, the Zacks average price target is at $477 per share. The average suggests a potential 4..8% upside from Friday’s closing price of $455.31.
Image Source: Zacks Investment Research
Conclusion
Holding shares of Berkshire Hathaway renders dynamism to shareholders’ portfolios. Also, the company has Warren Buffett at its helm, who has been creating tremendous value for shareholders over nearly six decades with his unique skills.
Berkshire shares have been trading at a premium for quite some time. Given that its shares are now trading in line with the industry average, it is wise to add this Zacks Rank #2 (Buy) company to your portfolio.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.