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On May 28, we issued an updated research report on Berkshire Hathaway Inc. (BRK.A) (BRK.B - Analyst Report) The company reported first-quarter operating earnings of $1.43 per share, missing the Zacks Consensus estimate by a couple of cents. Results primarily suffered from a decline in operating earnings in the insurance segment.  

Despite the earnings miss during the first quarter, we remain confident that the conglomerate will perform favorably over the long term.  Berkshire Hathaway owns a gamut of businesses from ice cream to railways, which provides immense diversification.

Berkshire’s property and casualty insurance business has been the engine behind its growth, as it has successfully released huge moat (investible surplus), making numerous acquisitions possible for the company. This strength differentiates Berkshire’s insurance companies from its competitors.

Berkshire’s economically sensitive non-insurance businesses – utilities and energy, and manufacturing, service and retail – are performing well and expected to continue so with the economy gradually improving. The utilities and energy business is witnessing substantial growth led by increased revenues from BNSF, the railway which was acquired in Feb 2010. Revenues from BNSF have contributed majorly to the company’s top line.

Berkshire’s Finance and Financial Products segment is also performing well after suffering from the soft housing market in the recent past. We expect improving trends in this business segment given that the housing market is catching up.

Moreover, with Warren Buffett at the helm, the company has created tremendous value for its shareholders over the past several years. A strong capital position along with his unique skills in making the right acquisitions has made Berkshire a conglomerate of more than 80 businesses and equity stake in many big companies.

Other stocks

Berkshire Hathaway holds a Zacks Rank #2 (Buy). Other players from the same industry such as Allied World Assurance Company Holdings, AG (AWH - Snapshot Report), AmTrust Financial Services, Inc. (AFSI - Snapshot Report) and  Aspen Insurance Holdings Ltd. (AHL - Snapshot Report) all carrying a Zacks Rank #1 (Strong Buy) are worth considering.

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