Warren Buffett and Berkshire Hathaway (BRK.A -0.23%) (BRK.B -0.42%) have become practically synonymous. When you see a statement saying that Buffett bought XYZ stock, you probably instinctively know that it means Berkshire added the stock to its portfolio.
With Buffett and Berkshire joined at the hip, it's understandable that the legendary investor would be his company's greatest cheerleader. But is Wall Street more bullish about Berkshire Hathaway right now than Buffett?
Wall Street's take on Berkshire
At first glance, Wall Street doesn't appear overly enthusiastic about Berkshire Hathaway. Of the four analysts surveyed by financial infrastructure and data company LSEG in January, two rated Berkshire as a "buy" with the other two recommending holding the stock.
However, we could see a more revealing picture with Wall Street's price targets for Berkshire. The average analysts' 12-month price target for the stock reflects an upside potential of 10%. This indicates a generally positive outlook for Berkshire.
What's more, even the most pessimistic analyst thinks the stock will rise instead of decline. The lowest 12-month price target for Berkshire Hathaway is more than 3% above the current share price.
Buffett's unusual hesitance
But Buffett is more optimistic about his own company than Wall Street analysts, right? Wouldn't the "Oracle of Omaha" expect Berkshire's share price to increase even more over the next 12 months than the consensus target of 10%? Maybe. However, there's a good case to be made that Buffett isn't so bullish about Berkshire right now.
Berkshire Hathaway's standing policy is that Buffett can repurchase shares anytime he believes the stock is trading below its intrinsic value. The only caveat is that stock buybacks aren't allowed if they would cause the conglomerate's cash position (including cash, cash equivalents, and U.S. Treasuries) to fall below $30 billion.
The cash position requirement certainly isn't a problem for Berkshire these days. It held over $325 billion in cash, cash equivalents, and U.S. Treasuries as of Sept. 30, 2024. For the first time in six years, though, Buffett didn't choose to repurchase any shares in Q3.
His unusual hesitance to buy back Berkshire stock is no doubt due to concerns about its valuation. Berkshire's share price soared 27% in 2024 after a 15% gain in 2023. The stock trades at roughly 23 times forward earnings.
Why Buffett is still the bigger Berkshire bull
So is Wall Street more bullish about Berkshire Hathaway right now than Buffett? Arguably yes. All of the analysts surveyed by LSEG predict Berkshire's share price will rise in the coming months. Half of them think the stock is a good pick for investors to buy. Buffett, though, apparently believes Berkshire is too expensive to buy at the current price.
However, I nonetheless view Buffett as a bigger Berkshire bull than any analyst on Wall Street. Analysts only look at the short term -- what they expect will happen over the next one to four quarters. Buffett looks at the long term -- what he thinks will happen over the next five to 10 years or more. And he remains confident about Berkshire's prospects over the long term.
Buffett emphasized in his letter to shareholders last year, "Berkshire is built to last." He also wrote, "Berkshire should do a bit better than the average American corporation, and more important, should also operate with materially less risk of permanent loss of capital." That's a more bullish long-term view about the company than I suspect most Wall Street analysts have.
Perhaps the strongest argument for why Buffett is a bigger Berkshire bull than Wall Street, though, is his skin in the game. Buffett owns over $148 billion worth of Berkshire stock, more than any other shareholder (including institutional investors).
He might view his company's share price as too high to buy temporarily. However, Buffett remains optimistic about Berkshire over the next decade and beyond.
