Warren Buffett, the 'Oracle of Omaha,' is about to reveal his report card, and UBS is bullish: optimistic about Berkshire Hathaway overcoming the 'August curse.'

According to the Zhitong Finance APP, Berkshire Hathaway (BRK.A.US), led by the "Oracle of Omaha" Warren Buffett, will release its earnings report on Saturday. UBS, an international investment bank, has published a bullish research report ahead of the earnings, betting that this investment giant, under Buffett's leadership, may break the so-called "August curse"—that is, it is expected to achieve significant upward movement during the traditionally weak month of August, which is pressured by high valuations, economic uncertainty due to tariffs, and seasonal selling factors. In its latest report, UBS slightly raised Berkshire's 12-month target stock price to $595 (B shares), corresponding to approximately $892,120 for A shares, and reiterated its "buy" rating on Berkshire. As of Thursday's close, Berkshire's B shares were priced at $471.88.

UBS stated that Berkshire Hathaway's GEICO insurance business will demonstrate unexpected growth resilience, while the operating profit margin of BNSF Railway is expected to expand against the trend. The dual engines of energy and manufacturing will help stabilize Berkshire's non-insurance business in the long term. More importantly, the record cash reserves—UBS expects the company's cash flow to rise from an unprecedented $340 billion to approximately $346 billion by the end of the year—will provide immense opportunities for mergers and acquisitions, expansion in the stock and bond market investment scale, and stock buyback potential. These factors collectively reveal a diversified and positive bullish investment outlook and fully highlight Berkshire's strong risk-averse investment attribute as a "safe haven."

In the U.S. stock market and even the MSCI global stock market, which have repeatedly hit new highs and entered the traditionally volatile "August curse" time window, does Berkshire, with its record cash flow, have the potential to outperform the market? UBS's valuation analysis model and fundamental outlook suggest that the answer leans towards affirmation.

Under the leadership of "Oracle" Buffett, Berkshire has not only achieved substantial returns in the stock market investment field over the long term but also currently possesses an enormous cash flow that enhances its risk-averse attributes. Additionally, it has a unique diversified business portfolio: on one hand, cyclical businesses such as BNSF Railway, manufacturing, and retail provide strong growth momentum when the U.S. economy is expanding positively; on the other hand, defensive sectors such as insurance, public utilities, and energy act as "profit ballast" during economic slowdowns or market declines, providing this investment giant with a buffer against downturns.

In terms of valuation models, UBS's report shows that Berkshire's expected price-to-earnings ratio and price-to-book ratio are both at historically low levels, providing an overall safety margin that makes Berkshire likely to perform better in high valuation environments and seasonal selling conditions, highlighting its risk-averse attributes and relative returns. In contrast, the overall valuation of the S&P 500 index constituents is near historical highs due to the significant price increases of large tech giants like NVIDIA and Microsoft, which account for a high weight in the index. The pricing trends of these tech giants, which cumulatively account for over 35% of the index's weight, imply that investors have overly optimistic bullish expectations. Once sentiment reverses, the volatility and potential price decline will be substantial Insurance sector profits are expected to exceed growth expectations, railway business remains stable and potential acquisition of CSX draws attention

UBS research report points out that Berkshire's insurance business is expected to fully reverse its downturn and welcome a strong quarter, mainly due to the recovery of profitability in GEICO's insurance business and lower disaster losses in the reinsurance business. After system upgrades and pricing adjustments, GEICO's combined loss ratio is expected to decline to about 83% in the second quarter of 2025 (far below its target level of 96%), indicating a significant improvement in underwriting profitability. At the same time, the number of policies and premium income are expected to return to a growth trajectory (policy volume year-on-year +6.5%, premium year-on-year +10%), and the property insurance reinsurance and Primary group are also expected to benefit from low disaster claims losses, with overall underwriting profits likely to exceed market expectations. Therefore, UBS expects the outstanding performance of the insurance sector to be the core driving force behind Berkshire's performance exceeding expectations.

The railway business is expected to operate steadily, and the potential acquisition of CSX draws attention. Berkshire's BNSF railway maintains stable operational efficiency in an environment of economic slowdown. Although freight volume growth in the second quarter of 2025 may slow from +5.2% in the first quarter to about +1.6% (partly affected by the decline in coal transportation), thanks to lower fuel costs and layoffs improving efficiency, UBS expects BNSF's operating profit margin to increase by about 1.2 percentage points year-on-year.

Recently, there have been significant consolidation signals in the railway industry: leading U.S. railway operator Union Pacific (UNP.US) intends to acquire Norfolk Southern (NSC.US). UBS analysis believes this may prompt Berkshire to take defensive measures and consider acquiring another eastern railway giant, CSX. CSX is currently trading at about 20 times its 2026 earnings, and if a 25% to 35% acquisition premium is granted, the transaction size is estimated to be between $82 billion and $88 billion, equivalent to about 24% to 26% of Berkshire's cash reserves. UBS estimates that this acquisition would have a significant accretive effect on Berkshire's earnings in 2026—assuming reasonable synergy growth effects, it would increase operating net profit by about 8% that year. This potential transaction would not only help BNSF expand into a nationwide intercontinental railway network but also effectively utilize Berkshire's record cash reserves to achieve a stronger growth curve.

For the "Oracle of Omaha" Warren Buffett, waiting for the right "elephant-sized" acquisition opportunity to seek leapfrog growth with massive cash is one of his investment principles. The potential acquisition of CSX is a typical example of this path: if the transaction price is reasonable and has synergy effects, Berkshire's enormous financial strength will come into play, achieving expansion without diluting shareholder value. At the same time, the company maintains a high degree of financial flexibility, and once the market experiences severe adjustments or valuation troughs, Berkshire can quickly deploy cash to repurchase its own stock or buy high-quality global assets at low prices. This "offensive and defensive" capital strategy is key to Buffett's long-term success, and the UBS analyst team highly recognizes this.

Berkshire vows to break the "August curse"

Under the helm of "Oracle of Omaha" Warren Buffett, the market is looking forward to this investment giant breaking the seasonal curse of the market with its long-term stable fundamentals, potential merger plans, and an incredibly large record cash flow.

Historical data shows that the largest market fluctuations often occur in August. Worse still, August is usually one of the two months with the worst stock market performance of the year. After setting the strongest consecutive rise record since 2020, the S&P 500 index, which is near its historical highest valuation, is about to enter the traditionally "most difficult period of the year."

Statistics indicate that over the past thirty years, the benchmark index has performed the worst in August and September, with an average decline of 0.7%, while other months have an average increase of 1.1%. Analysts generally believe that this seasonal selling characteristic partly stems from fund managers typically reassessing their annual portfolios during this period. This year, during the sensitive window of August to September, any news regarding Trump tariffs, economic data, Federal Reserve interest rate paths, or corporate earnings could trigger severe sell-offs in the stock market.

In the current environment where U.S. stocks are high and volatility concerns are rising, Berkshire, led by Buffett, is expected to demonstrate relative resilience and outperform the market due to its long-term stable fundamentals, undervalued premium, defensive asset allocation, and extremely ample strategic cash reserves, along with a merger market with vast imaginative potential. As market sentiment shifts from euphoria to caution, this "whale of Omaha" may navigate the turbulent waters more calmly with its deep intrinsic value and flexible financial and capital operations.

Berkshire's long-standing diversified layout means that regardless of the macro environment, there are business segments that benefit, thus presenting robust profitability that traverses the entire economic cycle. As UBS stated, if the U.S. economy thrives, manufacturing and railway businesses will soar; if the economy slows, record cash flow, insurance business, and a large balance sheet will serve as a defensive shield, supporting the company's performance. This dual capability allows Berkshire to remain relatively calm under different market conditions, especially with its "safe haven" attribute providing a fundamental basis for outperforming the market during periods of severe volatility and weakness.

Berkshire's stock investment portfolio and wholly-owned subsidiary businesses tend to favor industry leaders with stable cash flow and deep moats. For example, the top ten holdings such as Apple, Coca-Cola, and American Express have strong profitability, high risk resistance, and large cash reserves; core assets like insurance, utilities, energy pipelines, and railway transportation exhibit stable income characteristics. This investment style and diversified business layout determine that Berkshire's overall volatility is far lower than the market, and it often possesses excess alpha investment returns during market downturns