- Operating earnings may have disappointed a few on the Street, but Berkshire Hathaway (BRK.A, BRK.B) still trades for just 1.36x book value, writes Andrew Bary in Barron's.
- Barclays' Jay Gelb maintains his Overweight rating and $249K per class A share price target (vs. current $220K), as he expects book value will rise to $183K per share by the end of next year while the valuation will remain close to that 1.36x.
- The bull case for those who have been sleeping for a few decades: With no dividend, after-tax operating earnings of about $11K per share per year, or $18B, accrue to book value and replenish Berkshire's cash balance, enabling The Oracle of Omaha to make more accretive acquisitions - a virtuous cycle which doesn't appear to be reflected in BRK's valuation.
- There's also downside protection in Buffett's willingness to be a buyer of Berkshire at 1.2x book value.
- Risks? The obvious one is the possibly impossible shoes to fill of Warren Buffett.