Performance comeback: Berkshire Hathaway shares rise: is this the ideal buying opportunity for Buffett shares? | message
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• Berkshire Hathaway hit by Corona crisis
• In 2021, the share has outperformed the S&P 500 so far
• Should investors get hold of it now?
Corona pandemic weighs on Berkshire Hathaway
90-year-old Warren Buffett is considered one of the greatest investors of all time. With his investment vehicle Berkshire Hathaway, he pursues the value investing philosophy and holds large shares in US giants such as Coca-Cola and American Express. But Berkshire Hathaway is not just an investment vehicle, it’s also an investment company with more than 50 subsidiaries operating in a wide variety of industries. The conglomerate includes some of the best-known US companies: Geico, Duracell, Dairy Queen, Fruit of the Loom and BNSF. Berkshire thus has predominantly insurance, industrial, rail and energy holdings. Like many others, these sectors were hit hard by the Corona crisis and the massive economic setback associated with it. For example, Geico, a large US auto insurer, was instructed by states such as California to partially grant credits or reimbursement of premiums in lines such as car insurance, as Investor’s Business Daily (IBD) writes. Railway operators such as the BNSF Railway Company also had to contend with losses during the pandemic. Meanwhile, however, business is slowly but surely picking up again, according to IBD. In addition, other wholly-owned Buffett companies such as Dairy Queen or Pampered Chef suffered from the Corona crisis, but the situation is now easing again in these areas.
Buffett is buying back a record high of Berkshire stock
Despite the numerous holdings and investments, Berkshire Hathaway continues to sit on huge cash holdings. In the fourth quarter of 2020, this fell from its record level to still 138.3 billion US dollars. But this money also protects Berkshire from difficult times, and Buffett always has the option to buy companies when attractive opportunities arise.
The oracle of Omaha put some of the money into buying back Berkshire Hathaway shares in Corona year 2020. The Berkshire CEO spent a total of around 9 billion US dollars – more than ever before – on his own shares. As quoted by IBD Buffett, his investment vehicle “is likely to further reduce its stock count in the future.” The star investor explained this step in his annual letter to shareholders as follows: “The math of share buybacks slowly wears off, but can be powerful over time. The process offers an easy way for investors to find an ever-increasing share of extraordinary Company to own “.
Strong performance of the ultimate Warren Buffett stock
Nonetheless, Corona did not stop at Berkshire Hathaway shares either: The papers also crashed amid the pandemic-induced stock market decline. In March 2020, the NYSE was down as much as 25 percent – the share had never before posted such a sharp loss. But the share has been lagging the S&P 500 since the end of 2018; before that, at best, it had developed with the market. “I think it’s best for most people to own the S&P 500 index fund,” Buffett said earlier at a Berkshire annual meeting. “If you bet on America and hold that position for decades, you will do far better than if you buy government bonds, or far better than if you follow people. I don’t think anyone knows what the market will do tomorrow, next week, next month or next year will do. ”
In the meantime, however, the Berkshire titles are recovering and were even able to break out of flat base recently. “The flat base is one of the few reliable patterns that quality stocks train before they generate substantial price gains,” explains IBD. In the first few months of the stock market in 2021, Berkshire Hathaway shares also outperformed the S&P 500. Compared to the closing price on the last trading day in 2020, when a piece of paper cost 231.87 US dollars, the price of the share rose by more than 11 percent to 258.20 US dollars (as of: closing price on April 1, 2021). On March 10, it had even climbed to a new all-time high at US $ 267.50 at times. The S&P 500 is currently around 7 percent higher than it was at the end of 2020.
Buy Berkshire Hathaway stock now?
Numerous Wall Street analysts have recently been optimistic. They expect profits to grow 18 percent in 2021, while they think Berkshire should increase its profits by around 10 percent in 2022.
With all of these factors in mind, UBS analyst Brian Meredith has given Berkshire Hathaway shares a “Buy” rating and a price target of $ 272. “Our estimates assume that the economy will pick up again in 2Q21, which will give BNSF and the areas of manufacturing, services and retail a tailwind,” IBD quoted from a note by the UBS analyst to clients.
Nevertheless: In view of the fact that the share has performed worse than the S&P 500 in the past few years, it has developed more strongly in the new, albeit still relatively young year, but the uncertainty still remains, this may not be the ideal time to do so. to join Berkshire Hathaway, IBD also concludes. It can’t hurt to have the ultimate Warren Buffett stock on your watchlist, though.
Finanzen.net editorial team
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