Whitney Tilson Says Berkshire Hathaway Is Undervalued (BRK.A) ~ market folly

Wednesday, January 20, 2010

Whitney Tilson Says Berkshire Hathaway Is Undervalued (BRK.A)

T2 Partners hedge fund manager Whitney Tilson thinks shares of Berkshire Hathaway are undervalued. Speaking about the A shares (BRK.A), Tilson was recently on CNBC commenting that he thinks Berkshire has an intrinsic value of $130,000-140,000 per share. Under this assumption, this would mean Berkshire's A-shares are massively undervalued since they currently trade around $100,000.

Tilson also talks about the B-shares (BRK.B), noting that the potential 50:1 stock split could serve as a catalyst. Burlington Northern (BNI), a company Berkshire is purchasing, is currently in the S&P 500. Once this acquisition closes, BNI will cease to be in the S&P 500 and a spot will open up for a new stock to be admitted. Tilson thinks this could serve as a catalyst for Berkshire B-shares if the stock split is approved and shares become more 'affordable' on a per share basis. After all, Berkshire Hathaway is by far the largest company by market capitalization that is currently not in the S&P 500. Tilson also said in his weekly email that Berkshire Hathaway was now T2's largest position.

One of the main concerns for investors going forward is the succession plan at Berkshire once Warren Buffett steps down (if he ever does hah). He is obviously responsible for a large part of their success and this could potentially serve as a negative catalyst should anything happen to Buffett. Tilson has been a longtime believer in shares of Berkshire and we've covered his previous thoughts on the subject.

Tilson also focuses on some short selling opportunities as he singles out the homebuilders and regional banks. Due to all the foreclosures around the nation and housing inventory levels, he feels homebuilders will have a rough road ahead as there is already so much supply. Turning to regional banks, Tilson thinks those with a lot of commercial real estate exposure are good short candidates given that he expects further losses in the CRE segment. We already knew this because we had previously gotten a glimpse at what companies Tilson's hedge fund T2 was shorting. For long positions, make sure to check out Tilson's case for General Growth Properties (GGWPQ) as well.

Here's the video of Tilson's recent interview:

For more insight from Tilson, check out him and many other prominent hedge fund managers at the Value Investing Congress May 4th & 5th in Pasadena, California. We've secured a discount for our readers with code P10MF4 so make sure to take advantage of it to receive investment ideas from some of the smartest investors out there.

blog comments powered by Disqus