Berkshire Hathaway: Do As Buffett Says Not As He Does (Archive)
Berkshire now looks fairly valued but faces worsening cash flows and looming underperformance.
This 5-Minute Pitch was originally published on Seeking Alpha before the launch of the Hunting Alphas website. It is shared here to showcase my previous work and track record. New 5-Minute Pitches published on this site will not be disseminated anywhere else.
Elevator Pitch
- An updated calculation of Berkshire's current P/B shows that it is trading in the fair valuation range.
- Leading manufacturing activity indicators warn of a slowdown, which could adversely impact Berkshire's earnings performance for its operating business.
- Cash flow conversion has worsened again over the last 2 quarters and the deterioration is not a miniscule amount.
- Technical analysis of Berkshire relative to the S&P500 also suggests mean-reversion possibilities back down towards the longer-term 15-year trading range, implying negative alpha potential vs the broad market index.
- I have my eye on the rebounding consumer sentiment indicators as a key risk monitorable. If this translates to earnings surprises in Berkshire's equity investments, it could play spoilsport to my 'Strong Sell' thesis.
Read the full article here.
Disclosures and Disclaimers
Past performance ≠ future results. Not investment advice. See full Disclaimer.
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