Investors with a few hundred thousand dollars to spare who are hunting for a bargain in financial services stocks ought to buy a few shares of Berkshire Hathaway (BRK.A), according to a KBW report released Monday.
Analyst Cliff Gallant initiated the firm, headed by billionaire Warren Buffett, with an outperform rating and a target price of $107,000, 24% above its closing price of $86,210 on Friday. Despite fears that Berkshire's exposure to derivatives and a broader decline in its investments amid a global economic slump, Gallant believes Berkshire will come out ahead.
"Berkshire is a myriad collection of high-quality businesses, particularly in insurance and reinsurance, with attractive long-term growth prospects," Gallant writes. "Despite negative marks in its derivative portfolio, the recent global financial turmoil has left Berkshire standing tall as one of the world's few financially sound institutions."
Last quarter, Berkshire suffered its first loss in eight years, spooking investors who viewed the firm as a safe haven because of its massive cash reserves, record of safe investing and its managerial prowess. But no stone has been left unturned by the global financial meltdown, and many of the company's major investments had lost significant value, including Wells Fargo (WFC - Get Report), US Bancorp (USB - Get Report), Goldman Sachs (GS - Get Report), General Electric (GE - Get Report), ConocoPhillips (COP - Get Report) and Dow Chemical (DOW - Get Report).Berkshire shares are down 29% over the past year, and 11% since the end of 2008. They have climbed 23% from a recent low of $70,050 reached in early March. The stock was trading up fractionally to $86,875 in recent trading.