I am quoted in this U.S. News and World Report/Yahoo Finance article: “Pros and Cons of Buying Berkshire Hathaway Stock”.
Berkshire is currently selling at a below market average price/earnings ratio and its earnings are projected to grow at an above market average rate over the next few years, says David Kass, a finance professor at University of Maryland’s Robert H. Smith School of Business. “Its intrinsic value is likely at least 10 percent above its current share price. Therefore, it’s undervalued and should be outperforming the market over the near future.”
The company’s largest holdings include Apple ( AAPL), Wells Fargo & Co. ( WFC), Kraft Heinz Co. ( KHC), Bank of America, and Coca-Cola. “Apple is Berkshire’s largest holding and Berkshire has been adding to it in recent quarters,” Kass says. “It has a below market average price-earnings ratio and above-average projected growth. Apple’s iPhone customers are very loyal and over 90 percent upgrade their iPhones every two to three years. Apple appears to be undervalued.”
Bank of America has successfully dealt with problems stemming from the financial crisis, and is well-managed and growing nicely, Kass says. “It, too, appears to be undervalued,” he adds.
Kraft Heinz’s specialty of turning food companies around should result in a higher stock price after it announces its next acquisition, Kass says. “Additionally, Wells Fargo should resume its growth and profitability over the next year or two after it recovers from the reputational damage of the scandal where many of its customers were charged for services that they did not request,” he says.