Berkshire Hathaway Inc (BRK.B)

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Berkshire Stock Gets Downgraded to Hold from Buy by Edward Jones
By: Barron's | September 28, 2023

Edward Jones analyst James Shanahan lowered his call on Berkshire Hathaway to a Hold from a Buy, citing the fact that the company has been beating its peers in the financial sector.

Berkshire Hathaway (tickers: BRK.A, BRK.B) shares are up 15.5% so far this year to $541,105, topping both the S&P 500 index, which has returned about 13% and Financial Select Sector SPDR exchange-traded fund (XLF) which is about flat. Bank stocks are in the red; the SPDR S&P Bank ETF (KBE) is down 17%.

The implication is that Berkshire’s strong gains make further outperformance less likely.

“Berkshire shares have appreciated considerably over the past six months, significantly outperforming financial services peers. We attribute the appreciation to an improved earnings outlook, which has been strengthened by an acceleration in investment activity and an interest-rate-driven increase in income from BRK’s large cash holding,” Shanahan wrote in a client note Thursday.

Berkshire is sitting on almost $150 billion in cash, one of the largest cash positions of any U.S. company. The figure is equal to almost 20% of the company’s market value of around $780 billion.

Berkshire shares have also benefited from their haven status and investors’ comfort with the company’s leadership team, which is headed by CEO Warren Buffett, 93.

Shanahan had been one of only two bulls on Berkshire among the roughly half dozen analysts that cover it. UBS ’s Brian Meredith also has a Buy on the stock, which now trades for around 1.5 times book value and for about 22 times projected 2023 earnings.

Shanahan had upgraded Berkshire to a Buy from Hold a year ago. Since then, the stock is up about 30%, double the gain in the S&P 500.

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