Buf­fett’s Berk­shire Hath­away earn­ings in­crease

The Pak Banker - - Company+Boss News -

NEW YORK: Meyer Shields says earn­ings at War­ren Buf­fett's Berk­shire Hath­away Inc. will in­crease the most since 2006 this year. He's also telling in­vestors to sell the shares be­cause the eco­nomic re­cov­ery is weak­en­ing.

The Stifel Ni­co­laus & Co. an­a­lyst has plenty of com­pany. For the first time since at least 1997, fewer than 29 per­cent of rat­ings for stocks cov­ered by bro­ker­ages world­wide are "buys," ac­cord­ing to 159,919 rec­om­men­da­tions com­piled by Bloomberg. An­a­lysts are turn­ing more pes­simistic even as they push up es­ti­mates for profit growth among Stan­dard & Poor's 500 In­dex com­pa­nies to 36 per­cent, the high­est since 1988.

"Peo­ple are sit­ting on a fence," said Paul Zem­sky, the New York-based head of as­set al­lo­ca­tion for ING In­vest­ment Man­age­ment, which over­sees $550 bil­lion. "When I go and talk to our eq­uity an­a­lysts, they look at the com­pa­nies and say, ' Boy these com­pa­nies look pretty good, earn­ings are OK, they have plenty of cash. What if there's a dou­ble dip?'"

Con­flict­ing an­nounce­ments two min­utes apart by In­tel Corp. and Fed­eral Re­serve Chair­man Ben S. Ber­nanke last week un­der­score the chal­lenges fac­ing an­a­lysts and in­vestors even as stocks trade at a lower price rel­a­tive to es­ti­mated earn­ings than al­most any time on record. In­tel cut its third-quar­ter rev­enue fore­cast, cit­ing weaker-than-ex­pected con­sumer de­mand. Ber­nanke said the cen­tral bank "will do all that it can" to safe­guard the re­cov­ery.

More than 54 per­cent of rat­ings for com­pa­nies in the U.S., U.K., Ja­pan and Brazil are "holds," the high­est level since Bloomberg be­gan track­ing the data in 1997. While the pro­por­tion of "sell" rat­ings in the U.S. has fallen to 5.1 per­cent, half the level of 2003, the to­tal com­bined with "holds" reached a record 71 per­cent last month, the data show.

"A 'neu­tral' usu­ally means his­tor­i­cally a ' sell,'" said Kevin Rendino, a money man- ager at New York-based Black­Rock Inc., which over­sees about $3.2 tril­lion. "Rat­ings chase stock prices. When ev­ery­one be­comes risk averse, they don't want to stick their necks out."

While pes­simism is in­creas­ing, an­a­lysts say prof­its for com­pa­nies in the MSCI World In­dex of 24 de­vel­oped na­tions will gain 28 per­cent in the next year. The MSCI in­dex trades at 11.5 times fore­cast earn­ings, data com­piled by Bloomberg show. Ex­cept for the six months start­ing Oc­to­ber 2008, the in­dex has never traded be­low 12.5 times re­ported earn­ings. Top­ping Es­ti­mates Trad­ing on Aug. 27 il­lus­trated the mixed mes­sages fac­ing in­vestors this year.

Stock in­dex fu­tures jumped at 8:30 a.m. when the Com­merce Depart­ment re­vised its sec­ond-quar­ter eco­nomic growth es­ti­mate to a 1.6 per­cent an­nual pace, be­low the ini­tial as­sess­ment of 2.4 per­cent re­ported last month, yet beat­ing the 1.4 per­cent me­dian fore­cast from a Bloomberg sur­vey of 81 econ­o­mists. The mar­ket opened higher, with the S&P 500 ad­vanc­ing 0.2 per­cent.

The gains were erased just be­fore 10 a.m. when In­tel said con­sumers were cur­tail­ing com­puter pur­chases. Two min­utes later, Ber­nanke sparked a 1.7 per­cent rally in the S&P 500 by pre­dict­ing an im­prov­ing econ­omy in 2011.

"This mar­ket has been whip­saw­ing us back and forth," said Mike Ryan, the New York-based head of wealth man­age­ment re­search for the Amer­i­cas at UBS Fi­nan­cial Ser­vices Inc., which over­sees about $641 bil­lion. "Peo­ple are in­ter­pret­ing each and ev­ery data point ei­ther for val­i­da­tion or for re­pu­di­a­tion of the view they hold."

Gains on Aug. 27 trimmed the S&P 500's weekly de­cline to 0.7 per­cent, clos­ing at 1,064.59. Fu­tures on the gauge rose 0.2 per­cent to 1,066.3 as of 9:10 a.m. in London.

The bench­mark gauge for U.S. eq­ui­ties is down 4.5 per­cent in 2010 af­ter Europe's debt cri­sis wiped out an in­crease of as much as 9.2 per­cent. Cit­i­group's Eco­nomic Sur­prise In­dex show­ing how much U.S. eco­nomic data is dif­fer­ing from fore­casts fell to mi­nus 64 on Aug. 25, the low­est since Jan­uary 2009.

An­a­lysts from Stifel's Shields to Op­pen­heimer & Co.'s Rick Schafer and An­thony Gallo at Wells Fargo Se­cu­ri­ties LLC are ad­vis­ing clients against buy­ing shares of Berk­shire, In­tel and C.H. Robin­son World­wide Inc. even af­ter boost­ing profit fore­casts.

Shields says his biggest con­cern is that job­less­ness will weaken con­sumer spend­ing, which ac­counts for 70 per­cent of the Amer­i­can econ­omy. The un­em­ploy­ment rate held at 9.5 per­cent for a sec­ond month in July and has fallen less than a per­cent­age point from the 26year high of 10.1 per­cent last year, ac­cord­ing to the La­bor Depart­ment in Washington.

"It's negativity on the econ­omy and there­fore the ' sell' rat­ing on Berk­shire," Shields said in an in­ter­view from Bal­ti­more. -Bloomberg

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.