Benzinga - Investment expert and former hedge fund manager Whitney Tilson, current president and CEO of Empire Financial Research, presented his bullish thesis on Warren Buffett holding company Berkshire Hathaway Inc (NYSE: BRK-A) (NYSE: BRK-B) at Guy Spier's VALUEx conference in Klosters, Switzerland last week. In the presentation, Tilson explained why Berkshire has all three things he looks for in a stock: safety, value and healthy growth.
Low Risk: On the safety front, Tilson said Berkshire's portfolio structure and management style make it an excellent defensive investment in any market conditions.
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"Berkshire's huge hoard of liquid assets, the quality and diversity of its businesses, the fact that much of its earnings aren't tied to the economic cycle, and the conservative way in which it's managed all protect Berkshire's intrinsic value, while the share repurchase program provides downside protection to the stock," Tilson said.
In addition to its large stakes in public companies such as Apple, Inc. (NASDAQ: AAPL), Bank of America Corp (NYSE: BAC) and Chevron Corporation (NYSE: CVX), Berkshire also fully owns private companies such as GEICO and Dairy Queen.
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Attractive Value: On the value front, Tilson said Berkshire shares are currently historically cheap, trading at a roughly 15% discount to their intrinsic value. At the same time, that intrinsic value itself is growing at roughly an 8% annual pace, and as CEO, Buffett has bought back 10% of Berkshire's stock since 2019.
When factoring in the company's roughly $10,000 per share in cash build over the next 12 months, Tilson said Berkshire is a low-risk way for investors to generate an impressive return in the next year.
"Today the stock is 15% below intrinsic value (without giving any credit to immense optionality), with 34% upside over the next year," Tilson said.
Benzinga's Take: Buffett has had detractors and naysayers accuse him of being past his prime or too out-of-touch for Wall Street for decades. Buffett’s value investing approach has often led to him to miss out on trendy stocks, but his long-term success is proof that slow and steady wins the race.
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Latest Ratings for BRK.B
| Nov 2017 | Morgan Stanley | Maintains | Equal-Weight | |
| Aug 2015 | Barclays | Maintains | Overweight | |
| Jan 2015 | Barclays | Maintains | Overweight |
View the Latest Analyst Ratings
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