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goldman initiates coverage on berky


epictetus
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* Historic disconnect between intrinsic value, share price

 

    * Geico, MidAmerican, Burlington Northern to fuel growth

 

    * Slowing economy, big storms, Buffett retirement may hurt

 

    * Berkshire invested $5 billion in Goldman in Sept. 2008

 

   

 

    NEW YORK, June 29 (Reuters) - Berkshire Hathaway Inc (BRKa - news) (BRKb - news) shares may rise 25 percent in the next year as a recovering economy lifts profit and investors recognize that Warren Buffett's company is undervalued, Goldman Sachs analysts said, starting coverage with a "buy" rating.

 

    Analyst Christopher Neczypor set price targets of $152,000 for Berkshire's Class A shares and $101 for its Class B shares, saying a "disconnect" between the market value and intrinsic value of Berkshire is "close to a multi-decade high."

 

    Goldman Sachs Group Inc (GS - news) received a $5 billion preferred stock investment from Berkshire in September 2008. Buffett has praised the leadership of Goldman Chief Executive Lloyd Blankfein and defended Goldman's marketing of securities that led to a U.S. Securities and Exchange Commission civil fraud lawsuit. Wall Street banks have procedural safeguards to keep equity research units independent.

 

    Neczypor said earnings at Omaha, Nebraska-based Berkshire will benefit from growth in auto insurance sales through direct-to-consumer entities such as its Geico unit, as demand for energy from its MidAmerican Energy unit increases, and as more customers depend on shipping through its Burlington Northern Santa Fe railroad unit.

 

    He also said recent acquisitions have reduced Berkshire's dependence on equity investments, and "provides greater clarity into the source of future value for the company."

 

    He said the risks to this forecast include an economic slowdown, losses at Berkshire's insurance and reinsurance units from catastrophes such as hurricanes, and the ability of the 79-year-old Buffett to find appropriate successors.

 

    Neczypor projected operating profit of $6,161 and $6,972 for Class A shares and $4.11 and $4.53 for Class B shares for 2010 and 2011, more than 10 percent above the average analyst forecast according to Thomson Reuters I/B/E/S.

 

    Berkshire owns roughly 80 businesses and has tens of billions of dollars of common stock investments. Buffett expects his job to be split in two after he departs: One person will become chief executive, and one or more people will oversee investments.

 

    Class A shares of Berkshire closed Monday at $121,200, and Class B shares closed at $81.02.

 

    (Reporting by Jonathan Stempel; editing by John Wallace)

 

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Berkshire is one of my largest holdings.  I would throw the GS report straight into the damn trash can.

 

They could have issued the buy when the price was $105,000 recently.  Instead they wait till the stock has significantly appreciated when Mr. Market has tanked.  That's their "Let's see how manipulative of our customers we can be this time.......and get away with it once again."

 

Even Abby Joseph Cohen would be impressed at the call as she knows the value of screaming "buy" on whatever is currently up in price.

 

 

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someone put out a report (I don't have it) that the Financial Regulation bill as currently written would force BRK to put up $8 Billion or so in collateral for its derivatives. Buffett has argued against this for existing contracts and you can pretty much gurantee that the big banks won't be posting margin on their positions (probably a loophole somewhere or a change coming), but still would be a pain in the neck for BRK if this actually happens

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I don't see hoe BRK would be forced to post collateral while all the others would not have to. Requiring collateral on existing contracts would reduce the banks ratios by a wide amount. BRK is not alone against retroactive collateral and of all the companies involved it is probably the least affected by it.

 

BeerBaron

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