Berkshire Hath Rg-B (BRK/B US)

Global Markets Comment

Berkshire has been puting its cash to use and along with buy-backs provides positive momentum tactically. Earlier in July it reported buying back ~ US$5.3b shares, a significant increase from prior quarters. It has also been making investments in value (banks – Bank of America, energy – Dominion energy and commodities – just announced exposure to Japanese commodity traders). Thus it provides a high quality play to the cyclical recovery (materials / financials/ industrials / commodities).

Performance since inception*

Company Profile

Berkshire Hathaway is an American multinational conglomerate holding company headquartered in Omaha, Nebraska, United States. The company wholly owns GEICO, Duracell, Dairy Queen, BNSF, Lubrizol, Fruit of the Loom, Helzberg Diamonds, Long & Foster, FlightSafety International, Pampered Chef, Forest River and NetJets, and also owns 38.6% of Pilot Flying J; and significant minority holdings in public companies Kraft Heinz Company (26.7%), American Express (17.6%), 0Wells Fargo (9.9%), The Coca-Cola Company (9.32%), Bank of America (11.5%), Apple (5.4%) and Barrick Gold.

Price History 1 year

Investment Case

We remain constructive on BRK as we anticipate positive trends in pricing will benefit Reinsurance. GEICO margins are expected to continue to deteriorate due to the current competitive environment; however, we see signs that pricing could be bottoming out, which would give a boost to underlying loss ratios in 2021. Berkshire also has a significant "war chest" which provides it with potential catalysts as it is put to use.

Price History 5 years

Risk in Investment Case

Declining oil prices are a source of risk to railroads due to slower growth or no growth in drilling activity and transportation of crude oil by rail. Weaker coal volumes due in part to lower natural gas prices could also result in lower revenue growth. Slower economic growth would likely translate into weaker volumes. Regulatory changes are a risk for railroads. For insurers, loss cost inflation may be better/worse than expected, resulting in better/worse than expected underwriting margins and earnings. Refer report for further risks.

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