Berkshire Hathaway's B-shares should be trading higher, but the market doesn't put enough value on the contribution of the conglomerate's massive $200 billion stock portfolio, according to analysts from J. P. Morgan.
Berkshire CEO Warren Buffett, also known as one of the most successful value-style investors, has talked about the concept of "look-through earnings." Companies pay investors dividends but they also retain some of their earnings. Over time, companies invest these retained earnings at a higher rate of return and that ultimately boosts their share prices, benefiting their investors.
When evaluating investments, Buffett not only looks at the operating earnings of the companies, but also calculates what Berkshire's share of their retained earnings would be, minus taxes.