Berkshire Hathaway Rides Apple and Other Stocks to Big Fourth-Quarter Gains

Andrew Bary Companies AAPL AXP BAC BRKA JPM KHC USB WFC American Express Apple Berkshire Hathaway Berkshire Hathaway Energy JPMorgan Chase Geico Kraft Heinz Bank of America Wells Fargo State Farm U.S. Bancorp Diversified Holding Companies Business/Consumer Services Warren Buffett Todd Combs Ted Weschler Buffett Gelb Jay Gelb Kraft Heinz AXP BAC BRKA BRKB GEC.XX I/XFFX JPM M/CYC N/DJN N/WER USB WFC Barrons.com Barrons Blogs Wires Fortune 500 S&P 500 index SPX CODES_REVIEWED Companies Feature Financials Investing Transportation author Andrew Bary author|Andrew Bary topicid 6151 name Andrew Bary extractedtext Andrew Bary rank 1 codetype author code andrew_bary nameformat surname_first author Andrew Bary id Andrew Bary barrons_display_subject BARCOMP barrons_display_subject|BARCOMP canbedisplaysubject true codetype BARRONS_DISPLAY_SUBJECT name Companies source MANUAL code BARCOMP value BARCOMP status modified co bkht co|bkht country US symbol BRKA codetype co displayname Berkshire Hathaway why about extractedtext Berkshire Hathaway source FACTIVA occurs true seoname berkshire_hathaway name Berkshire Hathaway orgtype public countrycode US relevancerange medium chartingsymbol STOCK/US/XNYS/BRK.B fcode bkht fullextractedtext Berkshire Hathaway ticker BRKA confidence 100 subcat com code bkht relevance 58 significance prominent onlinesignificance prominent confidencerange high exchange NYSE exchangeisocode XNYS co amexpr co|amexpr country US symbol AXP codetype co displayname American Express why occur extractedtext American Express source FACTIVA seoname american_express name American Express relevancerange low chartingsymbol STOCK/US/XNYS/AXP fcode amexpr fullextractedtext American Express ticker AXP confidence 100 subcat com code amexpr relevance 26 significance prominent onlinesignificance prominent confidencerange high exchangeisocode XNYS status modified co calen co|calen fullextractedtext Berkshire Hathaway Energy ticker BRKA codetype co displayname Berkshire Hathaway 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BAC codetype co displayname Bank of America why occur extractedtext Bank of America source FACTIVA seoname bank_of_america name Bank of America countrycode US relevancerange low chartingsymbol STOCK/US/XNYS/BAC fcode ncnbco fullextractedtext Bank of America ticker BAC confidence 100 subcat com code ncnbco relevance 26 significance passing onlinesignificance passing-mention confidencerange high exchange NYSE exchangeisocode XNYS co nwbc co|nwbc country US symbol WFC codetype co displayname Wells Fargo why occur extractedtext Wells Fargo source FACTIVA seoname wells_fargo name Wells Fargo relevancerange low chartingsymbol STOCK/US/XNYS/WFC fcode nwbc fullextractedtext Wells Fargo ticker WFC confidence 100 subcat com code nwbc relevance 26 significance passing onlinesignificance passing-mention confidencerange high exchangeisocode XNYS co sfauto co|sfauto fullextractedtext State Farm codetype co displayname State Farm confidence 90 why occur extractedtext State Farm source FACTIVA subcat com code sfauto relevance 19 name State Farm significance passing onlinesignificance passing-mention confidencerange high relevancerange low fcode sfauto co staban co|staban country US symbol USB codetype co displayname U.S. Bancorp why occur extractedtext U.S. Bancorp source FACTIVA seoname u_s_bancorp name U.S. Bancorp countrycode US relevancerange low chartingsymbol STOCK/US/XNYS/USB fcode staban fullextractedtext U.S. Bancorp ticker USB confidence 100 subcat com code staban relevance 18 significance passing onlinesignificance passing-mention confidencerange high exchange NYSE exchangeisocode XNYS co APPLC co|APPLC symbol AAPL country US codetype co displayname Apple extractedtext Apple source MANUAL code aapl name Apple significance prominent onlinesignificance prominent exchange U.S.: Nasdaq exchangeisocode XNAS chartingsymbol STOCK/US/XNAS/AAPL fcode APPLC status modified co HINZC co|HINZC symbol KHC country US codetype co displayname Kraft Heinz extractedtext Kraft Heinz source MANUAL code khc name Kraft Heinz significance prominent onlinesignificance prominent exchange U.S.: Nasdaq exchangeisocode XNAS chartingsymbol STOCK/US/XNAS/KHC fcode HINZC status modified company BRKA company|BRKA name Berkshire Hathaway significance PROMINENT company AAPL company|AAPL name Apple significance PROMINENT company BAC company|BAC name Bank of America significance PASSING-MENTION company WFC company|WFC name Wells Fargo significance PASSING-MENTION company AXP company|AXP name American Express significance PROMINENT company USB company|USB name U.S. Bancorp significance PASSING-MENTION company JPM company|JPM name JPMorgan Chase significance PASSING-MENTION company KHC company|KHC name Kraft Heinz significance PROMINENT djn AXP djn|AXP codetype djn why occur source FACTIVA code axp name AXP significance passing onlinesignificance passing-mention fcode AXP djn JPM djn|JPM codetype djn why occur source FACTIVA code jpm name JPM significance passing onlinesignificance 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Gelb, Jay extractedtext Jay Gelb source FACTIVA code jay_gelb name Jay Gelb firstname Jay nameformat surname_first pe Kraft Heinz pe|Kraft Heinz lastname Heinz codetype pe displayname Heinz, Heinz extractedtext Kraft Heinz source FACTIVA code kraft_heinz name Kraft Heinz firstname Heinz nameformat surname_first relay SYND relay|SYND codetype RELAY name Syndication source EXPANDER value SYND code synd status modified statistic CODES_REVIEWED statistic|CODES_REVIEWED name CODES_REVIEWED value CODES_REVIEWED codetype STATISTIC code CODES_REVIEWED subject BARCOMP subject|BARCOMP codetype SUBJECT title Companies code BARCOMP name Companies canbedisplaysubject true ruleid BARCOMP value BARCOMP status modified subject BARINVST subject|BARINVST codetype SUBJECT title Investing code BARINVST name Investing canbedisplaysubject true ruleid BARINVST value BARINVST status modified subject BARFINANCIALS subject|BARFINANCIALS codetype SUBJECT title Financials code BARFINANCIALS name Financials canbedisplaysubject true ruleid BARFINANCIALS value BARFINANCIALS status modified subject BARTRANSP subject|BARTRANSP codetype SUBJECT title Transportation code BARTRANSP name Transportation canbedisplaysubject true ruleid BARTRANSP value BARTRANSP status modified subject BARFEATURE subject|BARFEATURE codetype SUBJECT title Feature code BARFEATURE name Feature ruleid BARFEATURE value BARFEATURE canbedisplaybrand true status modified wordcount 662 wordcount|662 Photograph by Johannes Eisele/AFP via Getty Images Berkshire Hathaway Rides Apple and Other Stocks to Big Fourth-Quarter Gains Berkshire Hathaway Rides Apple and Other Stocks to Big Fourth-Quarter Gains Berkshire Hathaway Rides Apple and Other Stocks to Big Fourth-Quarter Gains

The Warren Buffett-led company’s gigantic equity portfolio ended the fourth quarter on a strong note, given the outsize increase in its largest holding, Apple, and broad gains in its financial stocks.

Berkshire Hathaway Rides Apple and Other Stocks to Big Fourth-Quarter Gains

The Warren Buffett-led company’s gigantic equity portfolio ended the fourth quarter on a strong note, given the outsize increase in its largest holding, Apple, and broad gains in its financial stocks.

https://www.barrons.com/articles/berkshire-hathaway-is-a-top-stock-for-2020-heres-why-51577190600 https://www.barrons.com/articles/who-succeed-berkshire-hathaway-ceo-warren-buffett-51577375291 https://www.barrons.com/articles/warren-buffetts-lieutenant-ted-weschler-bought-up-optical-cable-stock-51550232000 https://www.barrons.com/articles/apple-heads-for-its-best-year-in-a-decade-maybe-its-time-for-a-stock-split-51577477926 https://www.barrons.com/articles/berkshire-hathaway-buys-restoration-hardware-stock-warren-buffett-stays-on-sidelines-51573831215 https://www.barrons.com/articles/BL-SWB-8323 mailto:andrew.bary@barrons.com Berkshire Hathaway Rides Apple and Other Stocks to Big Fourth-Quarter Gains By Andrew Bary Photograph by Johannes Eisele/AFP via Getty Images Warren Buffett.

Berkshire Hathaway’s gigantic equity portfolio ended the fourth quarter on a strong note, given the outsize increase in its largest holding, Apple, and broad gains in its financial stocks.

Barron’s estimates the portfolio gained over $30 billion in the fourth quarter and likely finished the year at more than $250 billion.

Overall, Berkshire (ticker: BRKA) is doing better financially than its own stock-market performance suggests, and its equity portfolio is a key part of the favorable story. Berkshire is one of Barron’s 10 top stocks for 2020, reflecting its reasonable valuation relative to book value and earnings.

Berkshire’s class A shares gained 11% in 2019 to $339,590, against a 31.5% total return for the S&P 500 index. That’s one of the worst relative showings for Berkshire during CEO Warren Buffett’s 54 years at the helm. The last time Berkshire lagged the S&P 500 by more than the 2019 margin was in 2009.

Berkshire A shares are up $1,840 to $341,430 in trading Thursday, and the company’s B shares (BRKB) have gained $1.18 to $227.68. The company is valued at $555 billion.

Barron’s estimates that Berkshire’s book value gained about $20,000 per A share in fourth quarter to $263,000, reflecting the large boost in the equity portfolio and projected operating income of $4,000 per A share. Buffett runs the bulk of the equity portfolio, with a portion of it—about $28 billion—divided between managers Todd Combs and Ted Weschler.

Our book-value estimate is above that of $254,000 made by Barclays analyst Jay Gelb in early November after Berkshire reported its third-quarter earnings. Since then, the stock market—and Apple (AAPL) in particular—have rallied. Berkshire is expected to report its fourth-quarter results on Feb. 22 in conjunction with the release of its annual report and shareholder letter.

The world’s largest conglomerate, Berkshire now trades at 1.3 times our estimate of fourth-quarter book value, which is lower than its average valuation in recent years. Gelb, who is bullish on Berkshire, has a price target of $375,000 per A share. Berkshire trades at about 21 times estimated 2020 operating earnings—above the market multiple of about 19. However, Berkshire’s earnings reflect only the dividends on its equity portfolio and the drag of about $128 billion in cash.

Berkshire’s operating earnings power is running at about $25 billion annually after taxes, reflecting contributions from its many businesses, including Burlington Northern Santa Fe railroad, Berkshire Hathaway Energy (a big electric utility and related businesses), and Geico, the No. 2 auto insurer in the country, behind only State Farm.

Apple stock gained 31% in the fourth quarter to $293.65, lifting the value of Berkshire’s holding to $73 billion—assuming no change in the company’s third-quarter Apple holding of 248.8 million shares. Apple accounts for about a third of Berkshire’s equity holdings. Apple is up another $4.87 to $298.52 Thursday, after setting another record high earlier in the session.

Berkshire also benefited in the fourth quarter from its large investments in financial stocks, led by Bank of America (BAC), Wells Fargo (WFC), American Express (AXP), U.S. Bancorp (USB), and JPMorgan Chase (JPM). Even Kraft Heinz (KHC), which performed poorly for much of 2019, gained 15% in the fourth quarter.

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

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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