Get Premium to unlock powerful stock data

Warren Buffett's Berkshire Hathaway Rises 0.78% on UBS Price Target Boost

Berkshire is rallying due to a number of factors

Author's Avatar
Feb 02, 2018
Article's Main Image

Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway (BRK-A) stock rose 0.78% on Thursday, continuing a rally that has seen the company's stock rise over 10% between Jan. 2 and the end of trade on Feb. 1. The company has had several big announcements this week, but the Thursday rally is attributed to a UBS price target increase.

UBS cites "significant" benefits from the Trump Administration's tax reform as the primary reason for the price target increase.

Class A share have had their price target increase from $319,000 to $366,000. Class B shares have also had their price target increased from $213 to $244. The stock is expected to outperform the broader stock market, with estimates that the lower tax rates will increase earnings by as much as 16%.

The company's Class A shares ended Thursday at $325,900 per share.

Berkshire Hathaway also made headlines when it was announced that Amazon (

AMZN, Financial) and JPMorgan (JPM, Financial) will join forces with Berkshire Hathaway in an effort to improve U.S. healthcare. The goal of the three companies is to start to curb the high costs of healthcare for their employees.

The three companies will work together and form a new company that will use technology to promote reasonable cost healthcare. When discussing health costs,

Warren Buffett (Trades, Portfolio) said the costs are "a hungry tapeworm the American economy."

The company will not add to any bottom lines and will be free from constraints and profit-making incentives.

Amazon has informed their employees that the new health plan will take a considerable amount of time before it is implemented.

The three companies have a combined number of 900,000 employees worldwide and will have the collective power to negotiate lower health care for their employees. If all goes well, the companies plan to improve health care for not just their own employees, but for all Americans.

The news did little to boost Berkshire Hathaway's stock on Tuesday when the announcement was made, but it sent shares of CVS (CVS) tumbling 5.5%.

Berkshire Hathaway is also expected to benefit from their purchase of Clayton Homes in 2003. The company's market share has tripled since the $1.7 billion acquisition thanks to the manufactured home market growing. The factory homes has helped the company grow along with the company moving into the site-built market, too.

The company's 2016 figures show that the company built 5% of all new homes in America. Rising home prices are expected to help boost the home builder's company further. Manufactured homes, geared towards the $150,000 and lower market account for 70% of all new homes.

Clayton Homes, and its parent company Berkshire Hathaway, are expected to benefit greatly from the record low housing inventory.

UBS's report also highlights Buffett's company with having $109 billion in cash on hand. The company's free cash flow could help this figure exceed $160 billion. UBS suggests that Berkshire may focus on acquisitions in the utilities industry. The company tried and failed to acquire Oncor, an electricity provider last year for $9 billion.

UBS expects Berkshire to use their cash or mergers and acquisitions.

(Disclosure: Author has no interest in any of the listed equities.)

0 / 5 (0 votes)

GuruFocus Screeners

Related Articles