Berkshire Hathaway: Look At Consumers And Cash Flows (Archive)

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

• Berkshire Hathaway is a large conglomerate with detailed disclosures of more than a dozen businesses, but only 2 things really matter; investments and cash flow conversion.
• Within the company's investment portfolio, consumer product businesses make up the bulk of the exposure. On this parameter, leading consumer sentiment indicators highlight earning tailwinds.
• However, the operating cash flow conversion profile is worsening due to a drop in deferred tax benefits, and management commentary suggests no rebound.
• P/B valuations show Berkshire Hathaway to be trading near its long-term average multiples since 2000, thus giving no reason to sway the case toward either a bull or bear.
• Hence, I initiate my analysis of Berkshire Hathaway with a neutral/hold as I believe the stock will perform broadly in line with the market.

Read the full article here.