* Historic disconnect between intrinsic value, share price
* Geico, MidAmerican, Burlington Northern to fuel growth
* Slowing economy, big storms, Buffett retirement may hurt
* Berkshire invested $5 billion in Goldman in Sept. 2008
NEW YORK, June 29 (Reuters) - Berkshire Hathaway Inc (BRKa.N) (BRKb.N) shares may rise 25 percent in the next year as a recovering economy lifts profit and investors recognize that Warren Buffett’s company is undervalued, Goldman Sachs analysts said, starting coverage with a “buy” rating.
Analyst Christopher Neczypor set price targets of $152,000 for Berkshire’s Class A shares and $101 for its Class B shares, saying a “disconnect” between the market value and intrinsic value of Berkshire is “close to a multi-decade high.”
Goldman Sachs Group Inc (GS.N) received a $5 billion preferred stock investment from Berkshire in September 2008. Buffett has praised the leadership of Goldman Chief Executive Lloyd Blankfein and defended Goldman’s marketing of securities that led to a U.S. Securities and Exchange Commission civil fraud lawsuit. Wall Street banks have procedural safeguards to keep equity research units independent.
Neczypor said earnings at Omaha, Nebraska-based Berkshire will benefit from growth in auto insurance sales through direct-to-consumer entities such as its Geico unit, as demand for energy from its MidAmerican Energy unit increases, and as more customers depend on shipping through its Burlington Northern Santa Fe railroad unit.
He also said recent acquisitions have reduced Berkshire’s dependence on equity investments, and “provides greater clarity into the source of future value for the company.”
He said the risks to this forecast include an economic slowdown, losses at Berkshire’s insurance and reinsurance units from catastrophes such as hurricanes, and the ability of the 79-year-old Buffett to find appropriate successors.
Neczypor projected operating profit of $6,161 and $6,972 for Class A shares and $4.11 and $4.53 for Class B shares for 2010 and 2011, more than 10 percent above the average analyst forecast according to Thomson Reuters I/B/E/S.
Berkshire owns roughly 80 businesses and has tens of billions of dollars of common stock investments. Buffett expects his job to be split in two after he departs: One person will become chief executive, and one or more people will oversee investments.
Class A shares of Berkshire closed Monday at $121,200, and Class B shares closed at $81.02. (Reporting by Jonathan Stempel; editing by John Wallace)