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• Berkshire is active in many sectors.
• Some Berkshire companies are likely to suffer more than others
• UBS analyst lowers target price
The COVID-19 pandemic has massively impacted the business of numerous companies. Investment companies like Berkshire Hathaway are particularly affected by this because they own shares in many different companies. But not all Buffett companies are experiencing the crisis, Warren Buffett’s investment vehicle also has a stake in some speculators.
UBS analyst looks closely at Berkshire holdings
The investment company not only has a massive stock portfolio, but also does business in a variety of different sectors, including rail, manufacturing, retail, services, and insurance. So Berkshire is “a representative sample of society”, Yahoo! Money A “very significant percentage of our companies are affected by the crisis,” Berkshire chief Warren Buffett warned in February, but noted at the same time that there are other reasons affecting the development of stocks. UBS analyst Brian Meredith carefully analyzed Berkshire’s holdings to determine which companies are the most stressful.
Buffett shares at risk
He took a particularly close look at Berkshire companies in the manufacturing, service and retail segments. In view of the fact that these industries have “reacted more sensitively to macroeconomic trends” in the past, Meredith expects a decrease in sales of about one percent. In this segment, Berkshire owns Precision Castparts (PCC), an aircraft parts supplier, chemical company Lubrizol, tool maker IMC Group, and prefab manufacturer Clayton Homes.
At PCC, the UBS analyst expects sales to have a significant impact, as aircraft manufacturers such as Boeing are currently facing major challenges. At the Buffett Lubrizol company, turmoil in the oil market is likely to leave massive footprints. Meredith expects a decrease in sales in the first and second quarter “in view of current conditions in the oil market and lower fuel demand.” However, in his opinion, the company could also benefit from lower oil prices and overall raw material costs, because the company not only produces lubricants and fuel additives, but also has customers in the chemical and construction industries, for which plastic pipes are produced, among other things.
Buffett companies benefiting from the crown crisis
For the Berkshire company, McLane Company, a supplier to the food sector, the pandemic crisis is likely to drive the business. Currently, more and more consumers are barely leaving their homes, activities such as eating out are almost on hold worldwide. McLane, which supplies convenience stores and discount stores as a wholesaler, could benefit from this development.
The current economic environment is putting pressure on the American railway company BNSF Railway Company, but the UBS analyst believes that the Berkshire company could be one of the beneficiaries of the crisis. In particular, if economic constraints are relaxed and economic activities resume more and more, this could be worthwhile for BNSF, believes Meredith: “Therefore, we forecast 4 percent sales growth for BNSF in the third and fourth quarter “, quotes Yahoo! Money to the experts. It also refers to low oil prices, which should have a positive impact on the BNSF business.
UBS expert Berkshire Hathaway is also well positioned in the insurance industry. The “stay home” trend means that not only will the number of vehicle miles traveled decrease significantly, but the Berkshire insurer GEICO should also benefit in the short term from the fact that the frequency of car accidents is decreasing.
Meredith, on the other hand, believes that COVID 19-related insurance claims in the area of reinsurance and primary insurance are “manageable.”
Lowest price target for Berkshire Hathaway
However, a giant conglomerate like Berkshire Hathaway should not be left unscathed by the crisis, which the UBS expert seized on as an opportunity to lower the investment company’s stock price targets. The Berkshire A share price target has been reduced from $ 393,000 to $ 358,000. Stock B is now said to have a potential of up to $ 239 instead of $ 262. This means that Share A would still have a price potential of around 27 percent. In his view, there is still room for a similar amount for the B share. Meredith retained its buy rating for both share classes.
Editorial office finanzen.net
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