Looking for a 'cheap' stock?
PaineWebber makes value call on Berkshire Hathaway
By Susan Lerner, CBS MarketWatch
Last Update: 6:29 PM ET Feb 15, 2000 Analysts Ratings
Market Pulse
NEW YORK (CBS.MW) -- At first glance you might think it's a typo when you see a stock quoted at "$43,000." See it matched up with the word "undervalued" and you'd think someone's nuts. But we're talking about Berkshire Hathaway, an insurance conglomerate with other investments headed by famed investor Warren Buffett, so the picture begins to take shape.
Telling clients that the stock is trading at its lowest valuation relative to book value in 17 years, PaineWebber analyst Alice Schroeder on Tuesday upgraded Berkshire Hathaway (BRK.A: news, msgs) to "buy" from "attractive" based on valuation.
"We believe the stock is trading around 50 percent below intrinsic value," Schroeder said, indicating that "an investor who buys today should reasonably expect to achieve returns of 15-35 percent over the next few years."
Schroeder acknowledged that we are in a momentum market in which valuation is often considered irrelevant and that the stock is likely to face continued selling pressure due to money flows away from value names and expectations of weak fourth-quarter operating earnings. But she said she believes the stock "is so compellingly priced that it simply overwhelms these factors."
"Finally," Schroeder said, "we do not believe that Warren Buffett's ability to allocate capital has disappeared, despite the multiples currently being placed on revenue growth of technology stocks."
Berkshire Hathaway shares moved up 2,900, or 6.7 percent, to 46,000 on the day.
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