Analysts Are Undervaluing Berkshire Hathaway Now That Greg Abel Is Putting the Company's Cash to Work. But That's Not the Reason.
The most encouraging aspect of the conglomerate's second-quarter report appears to have gone mostly overlooked.
Overview
Given that the stock's only a tad below analysts' consensus price target of $525.08 following the recent release of its second-quarter results, Berkshire Hathaway's (NYSE: BRKA) (NYSE: BRKB) Class B shares appear to be fully and fairly valued. And maybe they are.
Dig deeper, though. There may be something the analyst community isn't fully appreciating. And it's not the fact that CEO Greg Abel is finally starting to do something with all that idle cash the company's been sitting on, either. It's how well its biggest cash cow is now doing.
Details
It's easy to forget that Berkshire Hathaway isn't just a basket of hand-picked stocks. It's also a collection of privately held, cash-generating businesses like Duracell batteries, Pilot Travel Centers, Clayton Homes, Shaw flooring, and Dairy Queen, just to name a few. This is where most of the conglomerate's quarterly cash flow comes from, in fact, which of course is eventually invested for growth (one way or another). These businesses collectively contributed $11.7 billion worth of after-tax earnings in Q2 of this year, despite headwinds on the insurance front.
Source
Originally published at www.fool.com.