No. of Recommendations: 4
"" Berkshire Hathaway is set for a very
strong year as we head to the finish
line in 2023. Looking at the September
quarter more closely, earnings from operations, which exclude capital gains and
losses from the investment portfolio,
dialed in at $4.96 a share, a 65% increase
from the previous year’s tally. Net
premiums earned advanced nearly 14%,
which was due to business wins and
healthy price increases on existing operations. The company also received a shot in
the arm from higher investment income,
which benefited from rebounding equity
markets, along with solid bond reinvestment rates. What’s more, the company’s
Freight Rail Transportation and Utility
and Energy divisions generated healthy
profits during the September quarter.
We look for earnings to take a step
back next year, however, we believe
this requires a bit more color. Berkshire has been firing on all cylinders in
2023, and we look for this trend to continue in the fourth quarter. Berkshire’s insurance operations have benefited from
price increases across most product lines,
while its combined ratio has held up quite
well in the face of heightened industrywide catastrophes. The company has
also benefited from rebounding equity
markets and high bond yields. Hence, we
believe that some of these positive factors
may lessen, as we turn the calendar to
2024. Also, 2023’s likely robust results will
probably make for a very difficult comparison next year.
We forecast earnings of $16.00 a share
by the 2026-2028 time frame. The company has a strong presence in the property/casualty insurance industry, while its
diversification into other industries is certainly a plus during tough times in the insurance market. Its immense size and
strong leadership are positives, as well.
These shares don’t stand out from the
pack. They are only ranked to keep pace
with the broader-market averages, while
gains potential is limited for both the 18-
month and 3- to 5-year time frames. However, acquisitions, which have been part of
the company’s growth strategy, aren’t included in our forecast until they are completed. CEO Warren Buffett has a very
strong track record on this front.
Alan G. House December 1, 2023""
