Berkshire Hathaway: Stifel Nicolaus equity analyst Meyer Shields on July 8 lowered a rating on shares of Berkshire Hathaway (BRK/A; BRK/B), the conglomerate headed by billionaire Warren Buffett, with a $104,000 fair value estimate on the company's Class A shares. In a note, Shields said the rating change came as "our weak macroeconomic outlook implies poor [2010 second-half] earnings."
"We think declining consumer confidence will slow consumer spending, as employment very slowly recovers," he wrote. Shields said that "a shrinking appetite for increased public spending" should limit the size of any future economic stimulus packages, while a potential increase in oil prices above $85 a barrel could further affect consumers' discretionary expenditures.
Apart from its operating units' exposure to economic weakness, its shares face a "double whammy," Shields said, as its equity portfolio and derivative positions expose it to additional pressure on its book value. "Investors' focus on Berkshire's book value for valuation [implies] that its shares could outpace broader market's declines," he wrote. (more)
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