Analyst says weak insurance market could also be a worry
Barclays Capital says concern over Warren Buffett succession and a weaker insurance environment limits Berkshire Hathaway's stock growth, Reuters reports.
Analyst Jay Gelb on Monday began coverage of the insurance and investment conglomerate with an "equal weight" rating, and respective price targets of $132,000 and $88 for Berkshire's Class A and B shares. That is 9% above their Friday closing prices of $121,050 and $80.49.
Growth at the Geico Corp auto insurance unit should slow in 2010 as underwriting margins narrow, while reinsurer General Re may see unchanged premium revenue because of "disciplined" underwriting and rising catastrophe losses from unusually low levels.
Succession plan
Buffett, 79, has said he has three internal candidates to replace him as chief executive, and a few candidates to take over investments at Omaha, Nebraska-based Berkshire. Gelb said Buffett "probably has enough time to set his succession plan in motion to minimise disruption."
He said, though, that the "Buffett premium" in Berkshire's share price could erode once the world's third-richest person, and perhaps its most admired investor, steps down.
Many analysts consider David Sokol, who chairs Berkshire's MidAmerican Energy unit and has been improving the company's NetJets plane leasing unit, the top candidate to replace Buffett as chief executive. Gelb said Sokol would be successful in that role.
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