Berkshire Hathaway shares reached a fresh all-time high to start off a strong 2024, and one analyst thinks the conglomerate’s stock is still attractively priced and sees double digit upside. UBS analyst Brian Meredith hiked his 12-month price target for Berkshire’s Class B shares to $435 from $410 previously. The new forecast would translate into a 15% gain from Berkshire’s intraday high of $377.59 hit on Wednesday. The analyst is increasingly bullish on Warren Buffett’s company for a host of reasons. First, Berkshire shares are currently trading at a 14% discount to their intrinsic value, lower than the average discount of 18% over the last eight years but still a level that has historically spurred it to become active in buying back its own shares, Meredith said. BRK.A 1Y mountain Berkshire Hathaway Class B shares Buyback activity slowed the past two years, with Berkshire spending about $7 billion in repurchases in the first nine months of 2023, and a total of almost $8 billion in 2022. But in 2021, for example, Berkshire spent a record $27 billion in buybacks. Berkshire first initiated a buyback program in 2011 and relied on repurchases partly as a means of deploying capital when other opportunities didn’t present themselves. Secondly, the UBS analyst said Berkshire’s array of different businesses remains strong. “The fundamental outlook for BRK’s Insurance and Non-Insurance businesses in 2024 is good at a reasonable price,” Meredith said. In insurance, UBS expects profit margins to improve at auto insurer Geico this year, while Berkshire Hathaway Reinsurance Group is expected to see strong growth in premiums and improved profitability. At the same time, Berkshire’s railroad business, BNSF Railway Co. , as well as its building and consumer products businesses, should also see improved revenue growth, Meredith said. Lastly, UBS noted that Berkshire has historically benefited, on a relative basis, from an economic slowdown. So if the U.S. economy were to deteriorate, the conglomerate could see a flight-to-safety bid given its unmatched balance sheet and a fortress of cash. “Should there be an economic downturn in the year ahead, we expect BRK to outperform supported by its diverse mix of businesses and very strong capital position,” Meredith said. Not to mention that Buffett, the “Oracle of Omaha,” is known for taking advantage of economic slowdowns by investing in quality businesses or purchasing them outright at attractive prices, the analyst noted. Berkshire is set to report fourth quarter earnings late next month.
