(The following appeared at SeekingAlpha.com on September 8.)
Union Pacific Corp. (UNP) has performed the best over the last three years of the 39 stocks owned by Berkshire Hathaway (BRK.A), which has benefitted from the stock picking of the famous investment guru, Warren Buffett.
UNP’s total returns over the last three years have averaged 32.1%. Year-to-date, UNP is up 21.3%. In 2007, it was up 38.3%, in 2006, up 15.9% and in 2005, up 21.85%. UNP closed Friday at $75.46. Morningstar.com’s estimated fair value for the stock is $70, which it advises investors to consider buying below $52.50 and selling above $91.
Berkshire began buying UNP and another railroad, Burlington Northern (BNI), last year. Of the stocks in the Berkshire portfolio rated by Morningstar, only the newspaper publisher, Gannett (GCI), publisher of USAToday and hundreds of community newspapers, looks vastly over-priced. It is trading at $17.37, 145% of its estimated fair value of $12. UNP, Walmart (WMT), Proctor & Gamble (PG), Burlington Northern, Costco (COST) and Nike (NKE) all are trading around their fair value estimates.
In the last week, stocks in the Berkshire portfolio were down an average of 1.31%, in the last month, down 0.72%; in the year to date, down 6.34% and in the last 12 months, down 5.49%. The stocks’ average annual returns over the last three years were 3.85%, and their average annual total returns over the next three years are projected at 19.85%. The stocks are trading at an average PEG ratio (PE/projected growth rate) of 1.38. The average projected growth rate for the stocks in the portfolio over the next three years is 8.78%, which is not anything to write home about.
Berkshire hasn’t held all of its stocks over the last three years and isn’t likely to hold them all during the next three years. Berkshire’s average stock traded at 76% of fair value. BRK.B closed Friday at $3,912, or 77% of Morningstar’s estimated fair value of $5,100. In the last week, BRK.B rose 0.26%, bringing gains for the month to 1.64% and reducing year-to-date losses to 17.4%. Total returns over the last 12 months were down 1.68%. The total return for the last three years averaged 12.38% annually, and the three-year annual expected return is 19.95%, according to Morningstar. Daily charts for Berkshire and stocks mentioned above are here.
Stocks trading above their 50-day moving averages are considered relatively bullish, those below, bearish. When the moving average convergence divergence histograms are above the zero line, the stocks are considered buying prospects. When they are below the zero line, they’re technically bearish. Thus, BRK.B and BRK.A are looking bullish while UNP and BNI are looking bearish on their daily charts.
Most traders also look at weekly, monthly and point and figure charts as well as at stock’s fundamentals. Point and figure charts with price objectives are here. On these charts, BRK.A and BRK.B have bullish price objectives while UNP has bearish ones. The charts and fundamentals have to pretty much agree before I’ll trade a stock or exchange traded fund. Of Berkshire’s 39 stocks, Comdisco Holding (CDCO), Tesco Corp. (TESO) and Wabco Holdings (WBC) are not rated. Their daily charts are here. Click on a chart to see hourly, daily, weekly and point and figures for a stock.