Why is Berkshire Hathaway stock so expensive?
Why is Berkshire Hathaway stock so expensive? There are lots of factors that can contribute to a high stock price. One of the biggest reasons why BRK. A is so expensive is because CEO Warren Buffett has decided against a stock split.
Berkshire stock is still a long-term buy for this reason
Over the last decade, Berkshire's price-to-book ratio has risen by roughly 15%. That increase in valuation multiple accounts for part of the stock's positive performance, but only a small part.
Berkshire Hathaway is a diversified holding company. Its subsidiaries are involved in insurance, transportation, energy generation, manufacturing, and retailing. The top three individual shareholders are Warren Buffett, Susan Buffett, and Ronald Olson.
Warren Buffett, its leader, is one of the most recognized figures in finance, renowned around the globe. There's a good reason for this fame: Berkshire Hathaway stock has been one of the best-performing investments in history, compounding value at market-beating rates for decades.
Berkshire Hathaway takes profit from its insurance company holdings and invests them in a portfolio of about 50 different stocks valued at around $380 billion. The company's wide range of products and brands makes it one of the most consistent stocks on the market today.
The company doesn't pay a dividend and has huge amounts of cash on its balance sheet. Berkshire Hathaway is a massive holding company that needs to make big investments to move the needle.
If you want to invest in Berkshire Hathaway, you can certainly buy some shares of the individual stock, but there is a potentially less risky option: Funds. Funds, such as index funds, exchange-traded funds and mutual funds, are baskets of stocks you can invest in all at once.
Warren Buffett was a major shareholders in Walmart until 2016, when he sold most of Berkshire Hathaway's stake in the retailer. At that time, Buffett cited Jeff Bezos and Amazon as a threat that made retail stocks a “tough” game.
Apple is Berkshire's largest public stock holding by far. Berkshire's $155 billion Apple stake is roughly four times larger than its second-largest holding. Buffett first bought Apple shares in the first quarter of 2016, and Apple's stock price is up more than 500% since the beginning of 2016.
Five companies make up roughly 79% of Berkshire Hathaway's equity holdings as of December 31, 2023: Apple, American Express, Coca-Cola, Bank of America, and Chevron.
Why not invest in Berkshire Hathaway?
Berkshire Hathaway doesn't pay dividends
In the comparison to the S&P 500 Index above, the performance figures include reinvested dividends. That is a benefit for the S&P 500, but has no impact on Berkshire Hathaway's performance because the company doesn't pay a dividend.
Anyone can invest in Berkshire Hathaway if they have enough money to buy at least one Class B share (about $360 in late 2023). For comparison, hedge funds are open only to accredited investors, meaning those with a high income or net worth and who can meet the fund's minimum investment, which can be $1 million or more.
Class A shares will typically grant more voting rights than other classes. This difference is often only pertinent for shareholders who take an active role in the company. Nevertheless, because of the voting rights, A-shares are often more valuable than B shares.
As of Dec. 31, Berkshire held an astounding $133.4 billion in Treasury bills, with yields in the neighborhood of 5% to 5.4%. If yields remain on the low end of that range throughout 2024 and Berkshire maintains its current position, the company will generate about $7 billion from those investments.
Berkshire stock has struggled to outperform the S&P 500 index in recent years despite its outperformance in 2022. Before that, BRKB stock at best moved with the market for a decade.
Nonetheless, Berkshire's class A shares have delivered a Jaws-dropping annualized return of 20.3% from 1965 to 2021 – more than double the S&P 500's annual 9.8% return over the same period.
Berkshire Hathaway has experienced controversy due to its former charitable giving practices. Buffett believed that it was inappropriate for a company to direct its charitable giving to the pet causes of the board of directors.
The third top-notch safe stock you can confidently buy with $1,000 in 2024 is Berkshire Hathaway (NYSE: BRK. A)(NYSE: BRK.B). Take note that I'm specifically talking about Berkshire's Class B shares (BRK.B) since a single Class A share ($551,182/share) will set you back more than the average house in America!
Berkshire Hathaway is a large, diversified holding company led by renowned investor Warren Buffett that invests in the insurance, private equity, real estate, food, apparel, and utilities sectors. Despite being a large, mature, and stable company, Berkshire Hathaway does not pay dividends to its investors.
Berkshire Hathaway B (BRK.B) does not pay a dividend. Does Berkshire Hathaway B have sufficient earnings to cover their dividend? Berkshire Hathaway B (BRK.B)
Who owns Berkshire Hathaway?
Berkshire Hathaway is a holding company run by Warren Buffett that owns a diverse range of private businesses and significant minority interests in public companies such as Apple.
I purchased BPL's first shares of Berkshire in December 1962, anticipating more closings and more repurchases. The stock was then selling for $7.50, a wide discount from per-share working capital of $10.25 and book value of $20.20.
Geicois owned by Berkshire Hathaway, which is led by well-known investor Warren Buffet. Warren Buffett has owned shares of Geico stock since 1951, and Geico became a wholly-owned subsidiary of Berkshire Hathaway in 1996.
Warren Buffett carries an American Express card and about $400 in cash.
- Podcast Discussion: Warren Buffett's 4 Rules to Investing.
- Rule 1: Vigilant Leadership.
- Rule 2: Long-Term Prospects.
- Rule 3: Company Stability and Understanding.
- Rule 4: Understanding Intrinsic Value.
