Berkshire Stock Looks Good After Selloff as Book Value Grows on Apple Rally

Berkshire Stock Looks Good After Selloff as Book Value Grows on Apple Rally

The combination of a lower stock price and rising book value has made

Berkshire Hathaway

more appealing over the past two months.

Berkshire Hathaway’s Class A shares, which fell 1.1% Tuesday to $609,000, now are barely beating the


S&P 500

this year after being more than 10 percentage points ahead of the index when the stock peaked at $647,000 in late February, just after the company reported fourth-quarter 2023 earnings.

Berkshire’s A shares now are up 12.2% so far this year, against an 11.8% total return including dividends for the S&P 500. Berkshire’s Class B stock ended Tuesday at $403.90, down 0.9% on the session, and is up 13% so far this year.

Berkshire’s valuation has compressed to under 1.5 times estimated June 30 book value from above 1.6 times at the peak in late February, Barron’s estimates. Berkshire now trades close to its average of 1.4 times book value over the past five years. Book value has long been a key measure for valuing Berkshire.

The stock also trades for about 22 times projected 2024 earnings, in line with the S&P 500 index.

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Barron’s wrote in early April that the stock looked richly priced when the A shares traded around $634,000. 

CFRA analyst Cathy Seifert is bullish on Berkshire, having boosted her 2024 and 2025 earnings estimates nearly a month ago in the wake of Berkshire’s strong first-quarter earnings report. Berkshire now trades for under 21 times her above-consensus 2024 profit estimate of $19.55 per class B share. Siefert has a price target of $472 on the B shares, some 16% above the current price.

Many investors value Berkshire on so-called look-through earnings that give the company credit for the profits of the companies in its equity portfolio. Under accounting standards, Berkshire only records the dividends from those companies in its earnings. The look-through P/E ratio is below Berkshire’s stated P/E.

Berkshire’s shareholder equity—already the largest of any company in the U.S. stock market—has gotten a boost this quarter from the 11% rally in

Apple

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shares, the largest holding at about 40% in Berkshire’s $370 billion equity portfolio. Apple finished Tuesday at $190 and Berkshire held about 790 million shares of the iPhone maker on March 31.

Barron’s estimates that Berkshire’s book value, or shareholder equity per share, could hit a record $415,000 per class A share on June 30, up from about $398,000 per class A share on March 31, assuming no changes in the value of Berkshire’s equity portfolio over the next month.

 Berkshire’s shareholder equity could hit $600 billion on June 30, nearly double that of the No. 2 company,

JPMorgan Chase
.

That’s an impressive achievement for a company that had less than $50 million of shareholder equity when CEO Warren Buffett took control of the company in 1965.

Write to Andrew Bary at andrew.bary@barrons.com

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