After Earnings, is Buffett's Berkshire Hathaway a Buy?

Revelations from the Q3 earnings release, including the $157 billion in cash pile

Greggory Warren 6 November, 2023 | 10:30AM
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Warren Buffett

With wide-moat Berkshire Hathaway reporting third-quarter results that were in line with our expectations, we expect to leave our $600,000 ($400) per Class A (B) share fair value estimate in place.

Third-quarter reported revenue, which includes unrealised and realised gains/losses from Berkshire’s investment portfolios, was basically flat at $63.4 billion year over year. On a year-to-date basis, reported revenue increased to $309.2 billion from $141.6 billion when compared with the same period in 2022. Excluding the impact of investment gains/losses and other adjustments, third-quarter (year-to-date) operating revenue increased 21.2% (21.1%) to $93.2 billion ($271.1 billion), with much of the gain coming from the Alleghany acquisition and the onboarding of operating results from Pilot Travel Centers (in January 2023).

Key Morningstar Metrics for Berkshire Hathaway

Fair Value Estimate: BRK.A: $600,000.00

Fair Value Estimate: BRK.B: $400.00

Morningstar Rating: 4 stars

Morningstar Economic Moat Rating: Wide

Morningstar Uncertainty Rating: Low

Operating earnings, exclusive of investment gains/losses, increased 40.6% (19.2%) year over year to $10.8 billion ($28.9 billion) during the September quarter (first three quarters of the year), with most of the gain being driven by significantly better insurance underwriting results, including the Alleghany acquisition, and higher levels of investment income. When including the impact of the investment gains/losses, reported operating earnings declined (increased) to negative $12.8 billion (positive $58.6 billion) from negative $2.8 billion (negative $40.8 billion) in the prior year’s period(s).

Book value per share declined 2.5% sequentially to $363,413 from $372,966 at the end of June 2023, on par with our internal forecast for the quarter. The firm closed out September 2023 with a record $157.2 billion in cash and cash equivalents, up from $147.4 billion at the end of June 2023, as unutilized free cash flow (owing to a lack of viable investment opportunities), along with net stock sales of $5.3 billion, left cash balances firmly above the $150 billion threshold CEO Warren Buffett has claimed would be difficult to defend.

 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Berkshire Hathaway Inc Class A624,082.00 USD1.48Rating
Berkshire Hathaway Inc Class B413.98 USD1.06Rating

About Author

Greggory Warren  CFA, is a senior stock analyst with Morningstar.

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