Warren Buffett Watch
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Barron's is taking a strong bullish stand on shares of Warren Buffett's Berkshire Hathaway, calling them a "bargain" in the mid-$80Ks.
The Dow Jones weekly says the stock is trading at "just 1.2 times our estimate of current book value of $72,000 a share," well below its average over the past decade of 1.6 to 1.7 times book value.
"The current price-to-book ratio is near the low reached in early 2000, when Berkshire's stock bottomed at about $40,000."
Barron's Andrew Bary writes that a price target of $110,000 in the next year "doesn't seem outlandish" as it would translate into 1.4 times $80,000, the magazine's estimate of book value in 12 months.
Berkshire's current 1.2 price/book ratio is even lower than the 1.4 level it was at last November, when Bary called the stock "cheap." (That was almost a year after Barron's big 'Sell Buffett' cover story, in which it correctly predicted Berkshire shares would fall from the $140Ks.)
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Barron's notes that Buffett has grabbed opportunities created by the financial crisis to make over $20 billion of "promising investments" in Goldman Sachs [GS
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But, "Buffett's investment coups haven't registered on Wall Street," with the stock failing to match the stock market's overall rally since March.
Barron's argues that even if the stock market plunges again this year, Berkshire's downside seems "limited due to its low price/book ratio and the company's earnings power."
Bary's bottom line:
"Some think Berkshire's best days are over and there isn't much money to be made in the stock ... Yet the company looks stronger than ever, due to its promising portfolio and some top-flight businesses. Investors could now buy that package for a low premium to book value and get the talents of Buffett, who continues to demonstrate his incomparable investment skills."
The full Barron's story is only available online to paid subscribers.
Current Berkshire stock prices:
Class A: [US;BRK.A
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Class B: [US;BRK.B
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Data is a real-time snapshot *Data is delayed at least 15 minutes