Saturday, November 21, 2015

Buy BRK-B (Berkshire Hathaway Inc.) @ $125 to $132 in Aug to Nov 2015

BRK-B (Berkshire Hathaway Inc.) recommended Buy @ $125 to $132 in Aug to Nov 2015.
BRK is cheap on a sum of the parts basis. Market is focused on the under-performing stock portfolio with IBM, AXP, KO, WMT facing challenges.Although Insurance is in a down cycle many of the businesses in the housing and manufacturing industries, BNSF Railway and BH Energy have great growth prospects. Also Banking (WFC, BAC, USB), Insurance are poised to grow profit once interest rates rise and investments in partnership with 3G Capital (KHC, QSR) in slow evolving industries have good prospects.

Warren Buffett's capital allocation track record from 2011 to 2015 has been not that great. Investment in IBM where he strayed from his circle of competence, TSCDY, WMT inspite of prior bad experience in Retail, buying and selling XOM and the high multiple paid for PCP raise questions.
Even though Heinz and KHC has done well his decision to sell Kraft before split in 2012 due to disagreements with management may have been a mistake.
Investment track records of Todd Combs and Ted Weschler also have been a mixed bag. BNSF purchase in 2009/2010, BAC investment in 2011, purchase of Heinz and Kraft in partnership with 3G Capital, investment in WFC has been notable wins.

Although capital allocation has been mixed the strength of the Berkshire franchise is as strong as ever and BRK at @ 125-$132 which is likely 1.2 times 2016 end book value is a good risk-reward.

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