Morningstar

Berkshire's Businesses, Portfolio in Solid Shape

We expect to raise our Class A (B) share fair value estimate slightly.

Securities In This Article
Berkshire Hathaway Inc Class A
(BRK.A)
Berkshire Hathaway Inc Class B
(BRK.B)

While wide-moat-rated Berkshire Hathaway's BRK.A BRK.B reported fourth-quarter (full-year) results were in line with our expectations, we expect to raise our $480,000 ($320) per Class A (B) share fair value estimate slightly to account for the positioning of the company's businesses and investment portfolio coming into 2022.

Fourth-quarter (full-year) revenue, which includes both realized and unrealized gains/losses from Berkshire's investments and derivatives portfolios, declined 27.0% (increased 23.9%) to $75.8 ($354.6) billion from $103.7 ($286.3) billion in the prior year's period(s), on a marked decrease (increase) in investment gains year over year. Excluding the impact of investment and derivative gains/losses and other adjustments, fourth-quarter (full-year) operating revenue increased 11.5% (12.5%) to $71.8 ($276.1) billion. Operating earnings, exclusive of the impact of investment and derivative gains/losses, increased 45.1% (25.2%) year over year to $7.3 ($27.5) billion during the December quarter (full year) of 2021. When including the impact of the investment and derivative gains/losses, operating earnings increased 10.6% (111.2%) to $39.6 ($89.8) billion from $35.8 ($42.5) billion in the prior year's period(s).

Book value per share (by our estimates) increased 8.3% sequentially to $342,622 (from $316,443 at the end of September), above our forecast of $332,265 (which did not include as much of a contribution from the investment portfolio as occurred during the December quarter). The company closed out the fourth quarter with $146.7 billion in cash and cash equivalents, up from $138.3 billion at the end of last year, despite buying back $27.0 billion worth of Berkshire's stock during 2021. By our calculations, Berkshire came into the first quarter of 2022 with around $112 billion in excess cash on hand that could be committed to investments, acquisitions, and share repurchases.

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About the Author

Greggory Warren, CFA

Strategist
More from Author

Greggory Warren, CFA, is a strategist, AM Financial Services, for Morningstar*. He covers the traditional US- and Canadian-based traditional asset managers, as well as the alternative asset managers and Berkshire Hathaway. Over the course of his career, Warren has covered not only financial services names but companies from the consumer staples and consumer cyclicals sectors, and been involved in portfolio stock selection and management.

Prior to joining Morningstar in 2005, Warren worked as a buy-side equity analyst for more than eight years, covering consumer staples and consumer cyclicals. Before assuming his current role at Morningstar in 2017, Warren covered the financial-services sector as a senior analyst since late 2008. Prior to that time, he covered the non-alcoholic beverage manufacturers and distributors, packaged food firms, food service distributors, and tobacco companies.

Warren holds a bachelor's degree in accounting and English from Augustana College. He also holds the Chartered Financial Analyst® designation and is a member of the CFA Society of Chicago.

During 2014-19, Warren was selected to participate each year on the analyst panel at Berkshire Hathaway’s annual meeting, asking questions directly of Warren Buffett and Charlie Munger. The analyst panel was disbanded ahead of Berkshire’s 2020 annual meeting. Warren also ranked second in the investment services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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