Berkshire Hathaway (NYSE: BRK-B) owns over 433,000 shares of Jefferies Financial Group (NYSE: JEF), representing a 0.20% stake in the firm worth nearly $20 million. With a dividend yield of 2.69%, Jefferies Financial ticks several boxes for Buffett, and the stock has rewarded him with a 53% return over the past 12 months. While it’s no secret that Buffett is a fan of bank stocks, including his maiden investment in Cities Service Preferred, he’s selective about those he allows in his portfolio. 

Jefferies Financial was founded in the early 1960s and became a publicly traded stock in 1983. Wall Street analysts are bullish on JEF stock, with an average price target of close to $50 per share, reflecting 7% near-term upside potential. The most bullish of Wall Street analysts have a $56 price target attached on Jefferies Stock, which incidentally is trading within striking distance of its 52-week high. As a global investment bank, Jefferies is positioned to benefit from the rebound in the M&A industry unfolding this year.

Jefferies Performance 

While Berkshire Hathaway doesn’t pay a dividend, Buffett is a fan of investing in dividend stocks, including Jefferies. Berkshire Hathaway has been collecting dividends from this stock since 2022 when it first bet on the stock. Jefferies also boasts a history of lifting its quarterly distribution amount, including over the past five years, over which time it’s climbed from $0.125 to $0.30 per share. 

Jefferies has a strong and transparent balance sheet, one that CEO Rich Handler describes as “highly liquid” and low-risk, including long-term capital of nearly $18 billion, which is a good sign for future dividend payouts. Looking forward, Jefferies is in a good position to capture revenue from the recovery in the M&A industry, where the firm has recently expanded its business into Canada.  In addition to M&A, the bank is also active in debt issuance. Jefferies recently attracted nearly $3 billion to its coffers in the debt capital markets through its U.S. and European fixed-income divisions. 

In Q1, Jefferies reported profits of EPS of $0.69 per share, falling short of consensus estimates of $0.75 per share, on revenue of $1.7 billion. Performance was weighed down by an investment in a hedge fund called Weiss Multi Strategy Advisers, which was forced to shutter its operations, resulting in a net loss of $55 million for Jefferies, hurting asset management revenue and increasing expenses. The bank is optimistic about the rest of 2024, including the recent addition of new talent that it expects will contribute to results. 

Jefferies CEO Bullish on Stock Despite Share Sale

Jefferies boss Handler made headlines recently after selling $65 million worth of company shares and buying himself a yacht. In an offensive move, the bank boss addressed the sale in a statement. Since the 1990s, nearly three-quarters of Handler’s pay has been in the form of Jefferies stock, which he’s held onto with only a couple of exceptions. The most recent stock sale, which represents 7% of his Jefferies holdings, was a gift to himself and his family, he explained, noting that he had zero intentions of selling more shares and that he’s extremely bullish on the firm. 

 

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