UBS Loves Berkshire Hathaway Even Without Warren Buffett

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In a new report, UBS analyst Brian Meredith discusses his bullish outlook for Berkshire Hathaway Inc BRK BRK with or without iconic leader Warren Buffett. Buffett is now 85 years old, but Meredith believes that the “Warren Buffett premium” for Berkshire’s stock is not nearly as large as it once was.

“While Buffett’s superior capital allocation skills and market ‘clout’ would be missed, as long as the culture does not change, we would expect the company to continue to outperform,” Meredith explains.

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UBS sees Berkshire as well-positioned to outperform in an uncertain global market. Meredith points to the company’s strong cash flow, balance sheet and portfolio of industry-leading businesses as huge advantages in a challenging growth environment. He also believes that Berkshires strong capital position will enable it to continue to make well-timed acquisitions or investments regardless of the global economic environment.

Specifically, he projects that GEICO will benefit from moderating auto claims frequency in 2016. In addition, Meredith predicts that BH Primary will be one of the major winners from the re-underwriting initiatives at American International Group Inc AIG and Zurich.

UBS’s sum-of-the parts valuation of Berkshires businesses values the company’s class A shares at $244,500. In the report, UBS initiated coverage on Berkshire’s stock with a Buy rating.

Disclosure: the author holds no position in the stocks mentioned.

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