Berkshire Hathaway (BRK.B) and HCI Group (HCI) Critical Review

HCI Group (NYSE:HCI) and Berkshire Hathaway (NYSE:BRK.B) are both finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, analyst recommendations, earnings, institutional ownership, dividends, valuation and risk.

Analyst Recommendations

This is a summary of recent recommendations for HCI Group and Berkshire Hathaway, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
HCI Group 0 1 1 0 2.50
Berkshire Hathaway 0 1 0 0 2.00

HCI Group currently has a consensus target price of $46.00, suggesting a potential upside of 11.70%. Berkshire Hathaway has a consensus target price of $210.00, suggesting a potential downside of 0.27%. Given HCI Group’s stronger consensus rating and higher probable upside, equities research analysts clearly believe HCI Group is more favorable than Berkshire Hathaway.

Insider & Institutional Ownership

64.4% of HCI Group shares are owned by institutional investors. Comparatively, 37.0% of Berkshire Hathaway shares are owned by institutional investors. 22.3% of HCI Group shares are owned by company insiders. Comparatively, 6.1% of Berkshire Hathaway shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Risk & Volatility

HCI Group has a beta of 0.86, suggesting that its share price is 14% less volatile than the S&P 500. Comparatively, Berkshire Hathaway has a beta of 0.77, suggesting that its share price is 23% less volatile than the S&P 500.

Valuation and Earnings

This table compares HCI Group and Berkshire Hathaway’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
HCI Group $231.29 million 1.53 $17.73 million $3.23 12.75
Berkshire Hathaway $247.84 billion 2.09 $4.02 billion $10.05 20.95

Berkshire Hathaway has higher revenue and earnings than HCI Group. HCI Group is trading at a lower price-to-earnings ratio than Berkshire Hathaway, indicating that it is currently the more affordable of the two stocks.

Dividends

HCI Group pays an annual dividend of $1.60 per share and has a dividend yield of 3.9%. Berkshire Hathaway does not pay a dividend. HCI Group pays out 49.5% of its earnings in the form of a dividend. HCI Group has increased its dividend for 5 consecutive years.

Profitability

This table compares HCI Group and Berkshire Hathaway’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
HCI Group 8.14% 13.68% 3.17%
Berkshire Hathaway 1.62% 6.86% 3.47%

Summary

HCI Group beats Berkshire Hathaway on 10 of the 17 factors compared between the two stocks.

HCI Group Company Profile

HCI Group, Inc. primarily engages in the property and casualty insurance business in Florida. It provides property and casualty insurance to homeowners, condominium owners, and tenants; and reinsurance. The company also owns and operates one full-service restaurant, two marinas, two retail shopping centers, and one office building. In addition, it offers designs and develops Web-based applications and products for mobile devices. The company was formerly known as Homeowners Choice, Inc. and changed its name to HCI Group, Inc. in May 2013. HCI Group, Inc. was incorporated in 2006 and is headquartered in Tampa, Florida.

Berkshire Hathaway Company Profile

Berkshire Hathaway Inc., through its subsidiaries engages in insurance, freight rail transportation, and utility businesses. It provides property and casualty insurance and reinsurance, as well as life, accident, and health reinsurance; and operates railroad systems in North America. The company also generates, transmits, and distributes electricity primarily from solar, wind, geothermal, and hydro sources; operates natural gas distribution and storage facilities, interstate pipelines, and compressor and meter stations; and holds interest in coal mining assets. In addition, it offers real estate brokerage services; invests in fixed-income and equity instruments; and engages in manufactured housing and finance business, leasing of transportation equipment, and furniture leasing activities. Further, the company manufactures boxed chocolates and other confectionery products; specialty chemicals and metal cutting tools; flooring, insulation, roofing and engineered, building and engineered components, paints and coatings, and bricks and masonry products; recreational vehicles, apparel products, jewelry, and custom picture framing products; and alkaline batteries. Additionally, it manufactures castings and forged components, machined airframe components, and engineered critical fasteners; airfoil castings; titanium and nickel; and seamless pipes, fittings, and forgings. The company distributes newspapers, televisions, and information; franchises and services quick service restaurants; distributes electronic components; and offers steel and logistics services, professional aviation training programs, and fractional aircraft ownership programs. In addition, it retails automobiles; furniture, bedding, and accessories; household appliances, electronics, and computers; jewelry, watches, crystal, china, stemware, flatware, gifts, and collectibles; kitchenware; and motorcycle accessories. The company was founded in 1889 and is headquartered in Omaha, Nebraska.

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