Berkshire Hathaway Analyst Duel: Buy vs. Sell (BRK-A, BRK-B, GS, SF)

Berkshire Hathaway Inc. (NYSE: BRK-A) (NYSE: BRK-B) and Warren Buffett are not supposed to be this controversial.  In fact, Mr. Buffett would probably tell you he’d rather be boring.  Yet, we now have two research calls out there which contradict each other.  Last week it Goldman Sachs started coverage of Berkshire Hathaway’s shares with a BUY rating.  This morning Stifel Nicolaus came out with the worst rating out there: SELL.  This puts Goldman Sachs Group Inc. (NYSE: GS) in direct fire, more or less, with Stifel Financial Corp. (NYSE: SF).  What gives?

Berkshire ran up to after it was added to the S&P 500 and Russell 3000 indexes.

The SELL rating from Stifel Nicloaus this morning is based more on a boring recovery scenario than any new financial meltdown.  Still, the thesis is that even a boring recovery is not priced into Berkshire’s share price.  The earnings estimate was also lowered for 2010 to $5,685, down from $5,764.  After looking at the small consensus group from Thomson Reuters, this is actually still above the $5,600+ from Thomson Reuters as consensus data.

Another concern in the downgrade is that Berkshire has significantly outperformed the S&P 500 and DJIA since early June.   Some additional weakness will come from a new round of weak consumer spending, as well as weakness in the railroad sector and in the P&C side of Berkshire’s insurance operations.  The big expected risk here that is not priced in, per Stifel Nicolaus, is a potential decline in the value of Buffett’s stock portfolio and from its sometimes controversial derivatives portfolio.

Stifel’s Meyer Shields comes up with an implied price target of $104,000 for the A’s and roughly $69 for the B’s.  That compares with prices of close to $119,000.00 and $79.35, respectively, today.

This is certainly a few days more recent than the Goldman Sachs BUY rating.  But it is also grossly different in nature.  Last week’s call from Goldman outlined that the disconnect between Berkshire’s market value and the intrinsic value of the combined business operations is close to a decade high and the price targets were put at $152,000 and $101.00.

Stifel now appears to be a Street-Low earnings target.  If the economic softness continues and ultimately becomes a double-dip recession, this SELL call will certainly be the one that gets to yell “Winner Winner, Chick Dinner!” on Wall Street.  If the market and economy manage to hold up or if they get better, then Stifel Nicolaus is going to probably have some explaining to do.

As always, you can see the full BUFFETT’s MOST RECENT HOLDINGS here.

JON C. OGG