Berkshire Hathaway (BRK-B) Current Date: 1/15/19 Dividend Yield: 0% Market Cap:483B 196.29 Price P/E (TTM): 27.68 P/CF (TTM): 13.88 P/B: 1.29 Berkshire Hathaway Inc. is a holding company owning subsidiaries engaged in property and casualty insurance on a direct and reinsurance basis through GEICO, General Re and Berkshire Reinsurance. Other business activities include electric utilities, railroads, flight training services, candy manufacturing,, newspapers, retailing, fine jewelry, etc. Berkshire Hathaway is headquartered in Omaha, Nebraska, and began as a group of textile milling plants. When Buffett became the controlling shareholder in the mid-1960s, he began a progressive strategy of diverting cash flows from the core business into other investments. Because of Berkshire Hathaway's long history of operating success and keen stock market investments, the company has grown to be one of the largest in the world in terms of market capitalization. Berkshire stock trades on the New York Stock Exchange in two classes, A shares and Our Valuation Models indicate that BRK-B may be significantly undervalued at its current B shares. What makes Berkshire price of 196.29. Due to the fact that Berkshire Hathaway is a diversified Holding Company, we unique? Early in his career Buffett came across the idea to use the "float" decided to model out a basic, conservative DCF. Our DCF analysis yielded target prices from his insurance subsidiaries to invest between $169.73 and $279.61. Barring a recession, we believe that the U.S. 10-Year Treasury elsewhere, mainly into focused stock Bond and long term U.S. GDP growth will be between 2-4%. The company’s current WACC, picks that would be held for the long which we took from Bloomberg, is 10%. This is the highest level that the company has seen term. Why should we invest? since before 2001. We also valued the company using an EV/EBITDA Multiple sensitivity Berkshire is incredibly well diversified, has a strong-cash position, and has analysis in which we used the appropriate multiple from NYU Stern. Our multiple analysis consistently beaten the S&P yielded price targets from $175.11 to $303.61. throughout every economic cycle. Due to the recent market correction, Berkshire is now at a fair value. Warren Buffett, Berkshire Hathaway CEO, is the face of value investing and his philosophy aligns with our fund. Buffett has consistently said he would rather spend his cash on investments in other businesses. However, recently he has initiated more than 1 Billion in share repurchases meaning he see’s Discussion of Economic Moat: Berkshire Hathaway long-term vision and diversified holdings put Berkshire as undervalued and the it in position to succeed during any economic cycle. Additionally, it’s strong cash position sets market as a whole as overvalued. Given Berkshire up well to capitalize on a discount in valuations. Moreover, the company's insurance the recent correction, Berkshire is well operations--Geico, General Re, Berkshire Hathaway Reinsurance Group, and Berkshire Hathaway positioned for long-term success due to Primary Group--remain important contributors to the overall business. Not only do the insurance its strong cash position. operations (excluding the investment in Kraft Heinz) generally account for around one third of their Historical Data (Thousands) pretax earnings, but they also generate low-cost float--the temporary cash 2016 2017 2018 holdings that arise from premiums being collected in advance of future claims, which is a major source of funding for investments. Sales 223,604 242,137 264,098 Operating Exp 18,217 18,181 26,360 Key Stats Comparison Berk.B BLK JEF ALL SPY Interest 3,497 5,394 4,203 Price/Earnings TTM 27.67 14.79 17.56 9.38 19.9 Dep & Amort 8,901 9,188 9,522 Price/Book 1.29 1.95 1.94 0.60 2.0 Taxes 9,240 (21,515) (19,256) Price/Sales TTM 1.83 4.47 1.17 0.73 3.1 Net Income 12,597 15,382 18,958 Rev Growth (3 Yr Avg) 10.59 4.24 -17.76 3.32 - Operating Margin % TTM 30.36 39.66 22.64 10.71 - Total Assets 620,854 702,095 736,459 Net Margin % TTM 20.26 37.59 19.53 8.83 - Total Liabilities 335,426 350,141 357,040 ROA TTM % 8.74 2.87 1.61 3.31 - Long Term Debt 59,085 62,178 62,599 ROE TTM % 18.12 18.19 7.32 17.49 - Retained Earn. 210,846 255,786 346,503 Debt/Equity % 25.73 15.22 75.60 27.29 - Cap Ex -12,954 -11,708 -13,337