Where’s the value?
Additionally, Berkshire Hathaway’s stock isn’t exactly cheap. With shareholders’ equity clocking in at around $191.6 billion, its market cap of $252 billion represents a better than 30% premium to book value. That’s pricier than many of its peers, though somewhat justified by Buffett’s willingness to buy back Berkshire Hathaway stock whenever it dips below a 20% premium to book value.
With a stock trading at a premium to book and to many in its industry, stagnant free cash flow, and no dividends, what’s left to support the company’s ability to outperform? In large part, it hinges on Buffett’s investing prowess, which, while substantial, can only do so much to fight the size penalty.
What say you, Warren?
Taking out a short position on Berkshire Hathaway would seem silly, given its incredible balance sheet strength, cash-generating capabilities, and reasonable (though still somewhat premium) valuation. Still, if Buffett wants a bear at his annual meeting, there’s a case to be made that the company is no longer really in a position to sustainably outperform. This Fool will gladly make that case.
If you’re still looking for your bear, Mr. Buffett — let me know.
The article A Volunteer to Be Buffett’s Berkshire Bear originally appeared on Fool.com and is written by Chuck Saletta.
Fool contributor Chuck Saletta has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway. The Motley Fool owns shares of Berkshire Hathaway.
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