Berkshire Hathaway Inc. (BRK.B - Free Report) has bought a stake worth $356 million in Paytm’s parent One97 Communications in a bid to penetrate into financial payments sector in India, per news sources. Paytm operates as India's largest digital wallet.
Digital payment system gained immense popularity given its safe and hassle-free usage. Here, all payments are made in digital mode. Paytm was founded in 2010 and has ever since, emerged as India's largest digital wallet within eight years of operations.
Digital payment industry is evolving and growing at a faster rate. With heavy dependence on technology and increased usage of smartphones, digital payment industry is well poised for growth. Per Statista Market Forecast, total transaction value in the Digital Payments segment amounts to $51.8 billion in 2018 while total transaction value is projected at a five-year CAGR of 17.4% to $98.3 billion by 2022. Making investments in such space are prudent decisions.
Berkshire Hathaway — a conglomerate with nearly 90 subsidiaries — engages in businesses ranging from ice-cream to insurance. Though the company runs heterogeneous businesses/operations, its property and casualty insurance business generates maximum return on equity. The company leaves no stone unturned to capitalize on growth opportunities banking on huge cash float. It exited the second quarter with float of $116 billion, reflecting a sustained increase in premium volumes.
Warren Buffet, who spearheads Berkshire Hathaway, has always eyed strategic investments, holding great promises for smart returns. His unique skills have always created a tremendous value for shareholders over the last 53 years.
Shares of Berkshire Hathaway have outperformed the industry in a year. While the stock has rallied 17.9%, the industry has increased 15.1%. The company has witnessed the Zacks Consensus Estimate move 3.4% north for 2018 and 1.3% for 2019 over the past 30 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Berkshire Hathaway is expected to benefit from its growing Insurance, Manufacturing, Service and Retailing plus Finance and Financial Products segments amid an improving economy. Its acquisitions will also drive growth. The expected long-term earnings growth rate is currently pegged at 7%.
Acquisitions by Other Insurers
Considering the insurance industry’s all-time high available capital resource, there has been a conspicuous craze for buyouts in the space. Recently, The Hartford Financial Services Group, Inc. (HIG - Free Report) agreed to acquire The Navigators Group, Inc. (NAVG - Free Report) for worth $2.1 billion in cash in its efforts to expand business globally. Kemper Corporation (KMPR - Free Report) has bought Infinity Property and Casualty Corporation for $1.6 billion to dominate the market in the nonstandard auto insurance space.
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