No. of Recommendations: 30
Value Line's analysis is not exactly the most insightful in the world, but I look at it sometimes because it's often a good one-stop shop to see what "industry consensus" looks like. Their outlook for any given firm is usually near the middle of the pack. They also generally do a pretty good job handling the big obvious things like splits, corporate events and one-time blips so that a long term apples-and-apples view can be constructed, despite the occasional errors.
For many years, Value Line's coverage of Berkshire has been overly conservative. They have a general rule of never ascribing any value to any acquisitions that have not been done, so they implicitly assume that Berkshire's cash will continue to pile up and not be deployed in anyway, and therefore that book growth will be in effect no higher than the current earnings yield. In short, they always have extremely low predictions of growth of book per share, and, since they use that as their yardstick for forward returns, they always predict very low returns. As you might expect, they have been wrong in almost every report for decades. This has been the case up to the last report dated March 1, which forecast 6.0%/year nominal growth in book per share and target prices $415-505 in 3-5 years, or annualized return in the range of zip to 6%/year from the then-current price of $406 per B.
Though the latest report is done by the same person, this has changed. They are now forecasting growth in book per share of 9.5%/year in the stretch [2021-2023] to [2026-2029], as well as earnings growth of 9.0%/year. They use 1.5 times book per share as their expected market valuation level (it used to be lower, I believe). They therefore have most recently had a price target of $525 to $640 per B share, still in a time frame with midpoint about four years from now. At the time of their last report dated May 31 the stock price was $413 per B, so they were forecasting annualized returns of 6-12%/year.
I don't think there is any more useful information in their analysis than there is in the discussions on this board, but if this is at all representative of consensus opinion, maybe other investors in the world do, or will, have slightly higher expectations of the firm?
Jim
No. of Recommendations: 3
Value Line does have an 18 month price target range of $338-$454, midpoint $396.
Pretty much in the ballpark of what Jim recently postulated:
"For whatever it's worth, if near term valuation levels and business results were to resemble
those typical of the stretch since January 2008, then from the current price of $432.19 per B share, the one year forward return might be
expected to be around inflation -13.6%. If inflation were to come out at 3.25%, that would mean an expected market price of $385.50 in a year."
Thanks Jim!
No. of Recommendations: 10
They are now forecasting growth in book per share of 9.5%/year in the stretch [2021-2023] to [2026-2029], as well as earnings growth of 9.0%/year. They use 1.5 times book per share as their expected market valuation level (it used to be lower, I believe). They therefore have most recently had a price target of $525 to $640 per B share, still in a time frame with midpoint about four years from now. At the time of their last report dated May 31 the stock price was $413 per B, so they were forecasting annualized returns of 6-12%/year.
Maybe people are starting to notice? Conservatively valued, conservative balance sheet, and a prospect of ~9% (+/-) a year growth when treasuries are giving 4.2-4.5%. What's not to like!
SA
No. of Recommendations: 1
Maybe people are starting to notice? Conservatively valued, conservative balance sheet, and a prospect of ~9% (+/-) a year growth when treasuries are giving 4.2-4.5%. What's not to like!
Son, it's about time I tell you about stocks and bonds.
