Highlights of Zacks Investment Ideas: Alleghany and Berkshire Hathaway

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Chicago, IL – March 22, 2022 – Today’s Zacks Investment Ideas feature highlights Alleghany Y and Berkshire Hathaway Inc. (BRK.B).

Is Berkshire Hathaway a buy after the Alleghany acquisition?

Berkshire Hathaway rose more than 2% this morning on news of its agreement to acquire insurer Alleghany in a blockbuster deal valued at $11.6 billion. The crown jewel of billionaire Warren Buffett, Berkshire said the company was paying $848.02/share in cash, a premium of more than 25% to Alleghany’s closing price last week.

The deal is expected to close later this year during the fourth quarter. Alleghenia shares jumped more than 25% on the announcement.

The deal bolsters Berkshire’s insurance arm which already includes Geico and reinsurance giant Gen Re. Y, which is often referred to as a mini-Berkshire, has had a similar journey from a primarily railway holding company to a insurance and investment company. Alleghany now primarily provides reinsurance and property and casualty insurance products globally.

From my perspective, this appears to be another potentially lucrative deal in a long list of substantial acquisitions. The Berkshire purchase reunites Buffett with Alleghany CEO Joseph Brandon, who originally ran Berkshire’s Gen Re unit from 2001 to 2008. Buffett knows exactly what he’s getting and believes Berkshire will be the ” perfect forever home” for Alleghany.

BRK.B shares had already outperformed this year, and it looks like investors are looking favorably on the details of buying Y as the stock hit an all-time high today. Berkshire Hathaway is part of the Zacks Insurance – Property and Casualty industry group, which currently ranks in the top 26% of approximately 250 industries.

Investing in stocks belonging to leading industry groups can provide a constant “tailwind” and increase the chances of success.

Let’s take a closer look at Berkshire’s investment chart.

Berkshire Hathaway Inc.

Berkshire Hathaway is a holding company for a multitude of businesses. The Company is primarily engaged in the insurance, rail freight and utility businesses.

globally. BRK.B also produces, stores and distributes electricity from a multitude of energy sources such as natural gas, nuclear and geothermal energy. An investment group led by Buffett took full control of BRK.B in 1965. Berkshire Hathaway is headquartered in Omaha, NE.

The atypical conglomerate is well known for its humble beginnings and now has more than 90 subsidiaries active in businesses ranging from chocolates and ice cream to property and casualty insurance. BRK.B maintains a strong capital position and substantial liquidity, which has been reduced slightly due to the recent acquisition of Alleghany. Berkshire regularly repurchases stock with $27.1 billion in shares repurchased last year.

BRK.B has exceeded earnings estimates in three of the past four quarters. The company recently posted fourth-quarter EPS of $3.27, a surprise +17.2% from the consensus estimate of $2.79. BRK.B delivered a surprise four-quarter average profit of +11.86%, helping the stock rise nearly 40% over the past year.

Analysts covering BRK.B have raised their full-year EPS estimates by 2.31% over the past 30 days. The Zacks Consensus 2022 EPS estimate is now $12.86, reflecting potential growth of 6.11% over last year.

BRK.B is ranked Zacks #2 (Buy) and is looking to continue its outperformance. Be sure to put it on your watch list if you haven’t already.

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Past performance is not indicative of future results. The potential for loss is inherent in any investment. This document is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold any security. No recommendation or advice is given as to whether any investment is suitable for any particular investor. It should not be assumed that investments in the securities, companies, sectors or markets identified and described have been or will be profitable. All information is current as of the date hereof and is subject to change without notice. The views or opinions expressed may not reflect those of the company as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management of securities. These returns come from hypothetical portfolios composed of stocks with Zacks Rank = 1 that have been rebalanced monthly without transaction fees. These are not the returns of actual stock portfolios. The S&P 500 is an unmanaged index. To visit https://www.zacks.com/performance for more information on the performance figures displayed in this press release.

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Alleghany Corporation (Y): Free Stock Analysis Report

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