Why is Berkshire Hathaway a good long term investment?
Berkshire Hathaway is an excellent business with steady cash flows and is coming off another solid year of earnings. Its growing cash pile gives Buffett and his team a lot of dry powder to put to work when the time is right. BRK. B cash and short-term investments (quarterly), data by YCharts.
Key Points. Berkshire delivers solid returns with less volatility. It owns a high-quality portfolio of companies and publicly traded stocks. Buffett's company has a massive cash position that it can use to capitalize on opportunities in the next downturn.
Warren Buffett is perhaps the best example of the power of long-term compounding. Buffett uses compound interest, dividend reinvestment, and the power of constantly reinvesting the operating cash flow generated by Berkshire's businesses to his advantage.
Berkshire Hathaway's insurance underwriting operations played a crucial role in its profitability, providing $5.4 billion in operating earnings compared to a modest loss the previous year. Buffett's property and casualty businesses benefited from higher underwriting premiums and lower realized payouts from claims.
Berkshire Hathaway owns dozens of enterprises and a roughly $350 billion stock portfolio. It is famous for its massive stake in Apple and longtime holdings like Coca-Cola and American Express. Overall, the portfolio alone is worth over $350 billion.
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%.
1. Long-term performance means sticking around. Over the past decade, Berkshire Hathaway's stock is up roughly 215%, versus a stock advance of 155% for the S&P 500 Index.
Buffett is seen by some as the best stock-picker in history and his investment philosophies have influenced countless other investors. One of his most famous sayings is "Rule No. 1: Never lose money.
Buffett follows the Benjamin Graham school of value investing which looks for securities with prices that are unjustifiably low based on their intrinsic worth. Buffett looks at companies as a whole rather than focusing on the supply-and-demand intricacies of the stock market.
Warren Buffet is especially well known for his 'value investing' strategy. This involves buying stocks that seem to be undervalued and selling them years later when they achieve their deserved market value.
What is special about 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. It has a market capitalization of over $715 billion and is the sixth-largest public company in the world.
Strengths. Diversified Business Model and Strong Insurance Operations: Berkshire Hathaway Inc (NYSE:BRK. A) boasts a diversified portfolio of businesses, with its insurance operations serving as the cornerstone.
In 1962, Warren Buffett began buying stock in Berkshire Hathaway after noticing it was statistically undervalued. Buffett bought the stock with the idea that as Berkshire closed textile mills and freed capital, there would be a tender offer at some point and they could sell the stock for a profit.
There's currently $167 billion on the books, which alone would be one of the world's largest companies at that market cap. It's safe to say that Berkshire Hathaway can be bought and held indefinitely without losing a wink of sleep.
Just know that a $250 investment is no longer even possible. The company's B shares -- its cheapest share class -- now trade at around $400. If you can meet that minimum investment, putting the money into Berkshire still makes a ton of long-term sense.
Has Berkshire Hathaway consistently beaten S&P 500 returns over a long period of time? Yes. Since 1965, Berkshire has done 20% compared to the S&P500s 10%. 57 years at 20% is in fact, crazy impressive.
The stock is roughly even with the index over the past 20 years with a 9.8% annualized return. That is despite dramatic growth in the company's operating profits and Buffett's coup in buying Apple stock, which is showing a nearly $150 billion gain for Berkshire.
Berkshire Hathaway owns dozens of enterprises and a roughly $350 billion stock portfolio. It is famous for its massive stake in Apple and longtime holdings like Coca-Cola and American Express. Overall, the portfolio alone is worth over $350 billion.
Greggory Warren: Well, about a decade ago, we really started noting in our research that we felt that Berkshire would survive the eventual departure of both Buffett and Munger and that there was a groundwork there for a successful transition that they really started around the new millennium.
Warren Buffet's 2013 letter explains the 90/10 rule—put 90% of assets in S&P 500 index funds and the other 10% in short-term government bonds.
What is Warren Buffett 70 30 rule?
A 70/30 portfolio is an investment portfolio where 70% of investment capital is allocated to stocks and 30% to fixed-income securities, primarily bonds.
“The first rule of investment is don't lose. The second rule of investment is don't forget the first rule.” Buffett famously said the above in a television interview.
Key Points. Warren Buffett made his fortune by investing in individual companies with great long-term advantages. But his top recommendation for anyone is to buy a simple index fund. Buffett's recommendation underscores the importance of diversification.
When he goes down a track that doesn't make sense, he does not pay attention to anything, which is a weakness for a big business leader like him. His biggest weakness is greed. He loves money too much that it interfered with his relationship with his family for a long time.
Apple was still Berkshire Hathaway's largest investment at the end of 2023, with a stake worth $174 billion. Buffett said a year ago that Apple was a better business than any Berkshire owned -- a significant statement, considering the incredible returns Berkshire has delivered over the years.
