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Berkshire Is Expected to Post Strong Earnings in 1Q16

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Berkshire beat analysts’ estimates

Berkshire Hathaway’s (BRK-B) stock has risen by 9% over the past month after falling by 5% over the past year. In comparison, the S&P 500 (SPY) has risen by 7% over the past month after falling by 4% over the past year. The stock has a low beta compared with the broader market, and it’s relatively less risky for long-term investments.

The company is expected to report EPS (earnings per share) of $3,130 in the March quarter. For 2016, the company is expected to report EPS of $12,000 against $11,000 in 2015, reflecting 8% growth year-over-year.

Berkshire’s holdings have been performing on the back of insurance, financials, and manufacturing. Chairman and CEO Warren Buffett is deploying cash for buying stocks at attractive valuations. Berkshire’s recent investments include Precision Castparts (PCP) and Kinder Morgan (KMI).

Berkshire reported operating income per share of $3,333 in the fourth quarter of 2015. For 2015, the company reported EPS of $15,000 compared to $12,000 last year.

Berkshire’s fourth-quarter earnings jumped 32% on the back of the strong performances of insurance company GEICO and BNSF Railway. The profits were also helped by an $805 million paper gain on derivative and investment contracts, compared to a $192 million paper gain in the prior year’s quarter.

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A heavy hitter in investing

Berkshire Hathaway, with a market capitalization of more than $342 billion, is a holding company whose subsidiaries engage in diverse business activities across sectors. Its subsidiaries operate in several major businesses:

  • insurance and reinsurance
  • freight rail transportation
  • utilities and energy
  • finance
  • manufacturing
  • service and retail

The company’s investments are made and managed primarily by Buffett and its vice chairman Charles Munger. Buffett purchased Berkshire Hathaway in 1965. At that time, the company was part of the textile business. Since then, the company has gone through several transformations and is now engaged in the buying and managing of businesses.

Berkshire Hathaway competes with asset managers and insurance players (PFF) including American International Group (AIG), MetLife (MET), and BlackRock (BLK).

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