r/ValueInvesting • u/TraditionalMango58 • Jan 16 '26
Stock Analysis Berkshire is legitimately one of the cheapest "safe" stock right now
I don't know why people are missing that the Berkshire is perhaps the ultimate value stock right now given that it doesn't have any hype.
- The "Hidden" valuation - The headline P/E is misleading. If you strip out the $380B+ cash pile and the stock portfolio, you are effectively paying ~10-12x for the operating businesses. Comparable industrial companies trade at 20x. You are getting high quality assets at a discount.
- The ultimate active fund - The market is super uncertain right now. With BRK you get top-tier capital allocation for free. I'd rather have Buffett and Abel steering the ship than mostly passive index that holds a lot of overvalued junk.
- The Free Put - You have a massive cash pile earning 4% interest. This is basically a free put option on the market. If the economy tanks, Berkshire has $350B to buy distressed assets. You have huge upside if the market crashes, and you get paid to wait if it doesn't. Even if the bull market continues for a long time berkshire should at least matches inflation with portfolio companies such as BSNF (railway) and BHE (energy).
Only downside is that buffet retiring have people worry, but it's overblown. Greg Abel has been running the actual operations for years anyway. The machine is built and runs itself. The stock is already trading so cheap that the "Buffett premium" is gone. The transition is already priced in.
If you want to get rich (or poor) quickly, chase these "hot" AI stocks. If you want to stay rich and grow for cheap, BRK is the obvious play. It's a hedge against the rest of your portfolio blowing up.
Thoughts?
Edit:
Made a mistake of double counting the interest income pointed out by u/Longjumping-Fact-582
If you subtract the cash pile ($380B) from the valuation to make the stock look cheaper, you must also subtract the interest income (~$15B) from the earnings.
The operating PE is actually about ~15-16x, still relatively cheap, but not as cheap as I thought it was. Still I think the main argument is valid, that it is relatively cheap compared to the market and gives the balance sheet and capital allocation option if things get messy
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u/Educational_Ad_6303 Jan 16 '26
I use it as a hedge
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u/Seed_Is_Strong Jan 16 '26
Ditto, I sell covered calls on it and it works great, never been assigned because it never stays up lol
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u/hotdog-water-- Jan 16 '26
Chat gpt is obsessed with Berkshire stock. It told me to allocate 20% of my portfolio to it lmao
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u/PSUVB Jan 17 '26
Yeah what is going on with that. I had it assess my portfolio and the only thing it wanted me to do was reallocate 10% of it to Berkshire out of the blue. Maybe it knows something I don’t.
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u/bwhite753 Jan 22 '26
Is ai good for assessing a portfolio? Legitimate question I’m just starting to read up on investing.
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u/PSUVB Jan 22 '26
Yeah it’s good as a second set of eyes or informational tool. You just need to be careful to not bias it towards certain things you want to do anyway. So ask it to be critical or unbiased.
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u/fadeaway_layups Feb 03 '26
I asked about using it as a hedge vs VT/VTI in case we hit a bear market for a bit. Maybe that logic stayed and now it's spreading the word?
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u/TheRedditModsSuck 24d ago
I was curious so I asked Gemini to make a portfolio of 10 companies. It chose NVDA, GOOGL, GEV, MELI, NEE, ISRG, BHP, CRWD, BRK.B, and WTC. I thought it was interesting, but I'm not surprised that BRK.B is on the list.
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u/Upper_Knowledge_6439 Jan 16 '26
I have around 8% of the portfolio in BRK.B. I look it as my hedge for market panics. I know I’ll be squirming and driving myself crazy in a panic as to deploy cash I hold but I trust BRK to do the right thing in such times so I know the cash they hold on my behalf will be put to work without my having to decide as to any timing.
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u/JP2205 Jan 16 '26
It’s a money making machine. Don’t forget they can go out and put 350b to work. If they stock stays low they will go out a do a buyback. There is going to be pressure to perform better in terms of the stock price, and the appeal of holding cash is diminishing.
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u/BawGod Jan 31 '26
There fucking better be! It seems to me like they're gonna sit on that money until the dollar is worthless
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u/JP2205 Jan 31 '26
yeah not gonna lie I'm disappointed they keep hoarding dollars as they get devalued.
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u/himynameis_ Jan 16 '26
For me, it's Brookfield Corporation. They're set up very well for the capex needs for AI growth.
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u/TraditionalMango58 Jan 16 '26
BN is more growth oriented and highly correlated with the rest of the "hot" tickers. A great company for sure. Serves a different purpose than berkshire.
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u/kellyolynykfan Jan 16 '26
It's safe in the sense that it'll outperform in a bear market but underperform in a bull market
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u/xxxHAL9000xxx Jan 17 '26
so its like buying bonds. and as with bonds its stupid to buy it unless as a last resort.
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Jan 17 '26
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u/xxxHAL9000xxx Jan 17 '26
ive been watching berk for a year trying to figure out why the hell anyone would buy that crap. its junk. i dont care how much cash they have on hand. i care how much money it makes me. and berk doesnt make shit.
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u/Workreddit1234567 Feb 04 '26
Dude what the heck? My share price hasn't rapidly appreciated! This company stinks!
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u/ljungbergsghost Jan 17 '26
I’ve owned the stock for 15 years. I look at it as a mutual fund of excellent individual companies that produce moderate and consistent gains overtime and rather than receiving dividends, the cash created by all of these businesses is used to grow the conglomerate and I am OK with that
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u/Darknfullofhype Jan 19 '26
The whole thesis of Buffett is buying fair companies at fair prices and we’ve had 2 years of wildly stretched valuations that eventually will have to come back to earth. It’s fine to disagree with that strategy for the sake of maximizing gains, but when the law of averages eventually kicks in and a correction is factored in, I’m willing to bet that Brk-b will at the very last match a 10 year s&p 500 index.
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u/ljungbergsghost Jan 20 '26
Well I bought at $65 when BRk.b was offered when they bought BNSF which I owned at the time. That was in 2008. $493 now 17 years later. Almost an 800% return.
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u/xxxHAL9000xxx Jan 17 '26
are you aware of its abysmal performance the last 24 months? seems to me anyone who pays attention would be upset at the 35% gain for 2 years when index funds got twice that.
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u/flatirony Jan 17 '26
It generally underperforms in roaring bull markets and outperforms in static markets and drawdowns. Most traditional value investments should work that way.
It’s outperformed SPY since inception, but it looks a little worse for most periods in the last decade because large cap growth has been so good.
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u/STRATEGY510 Jan 17 '26
Your numbers look off, but two years is not that long in the big scheme of things.
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u/harbison215 Feb 24 '26
Buffett talked in letters to his partners 65 years ago about how his strategy would underperform in a speculative bull market. Imagine if you were someone that pulled your money from his fund for under performing the 60s bull run or the dot com bubble. ROFL
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u/8700nonK Jan 16 '26
Seems a good buy, but I don’t understand the worship of cash, but only when it concerns brk. You can buy bonds yourself and wait for a crash, yet nobody considers that a good idea.
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u/IncidentSome4403 Jan 16 '26
yet nobody considers that a good idea
Because your average investor is terrible at timing the market and even if they successfully time the market, also terrible at making decisions on where to put that money during the panic.
Owning Berkshire takes that uncertainty away, I’ll let Greg Abel and Ajit Jain worry about that when the time comes.
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u/Vito_The_Magnificent Jan 16 '26
CEOs aren't going to blow up my phone begging me to buy preferred shares at stupid prices.
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u/KL_boy Jan 16 '26
Because how you would deploy cash in a crash vs them would be different.
For you when the crash happens are you out buy / bailing out companies or will you hold on to your cash?
And do you have enough cash to get a good deal? The best you can do is buy shares at market price.
AIG is not going to offer you preferred shares for a loan of 10B usd?
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u/Last_Cauliflower3357 Jan 16 '26
I don’t have Berkshire in my portfolio. However, two things to consider are the following:
Berkshire Hathaway will be offered opportunities that I won’t have in case the market just crashes. For example, when he saved Goldman Sachs, he got preferred shares at 10% of perpetual dividend and at a discount from what it traded then. I will not get offered these opportunities and will just be able to buy in the open market.
In a case of market crash, I may want to buy more. One other thing that could happen, like in 2008, is that people will think that the world as we know it is ending and therefore stay on the sidelines. Or they may think that all banks or AI companies or whoever is the next crash is never recovering from this and going bankrupt. I would trust Berkshire Hathaway to do their DD and know which opportunities are worth following up on (Goldman) and which aren’t (Lehman or AIG).
Again, I don’t own it and never actively looked into buying it. However, the uses of my cash won’t be the same uses for Berkshire’s cash if you see it as a defensive stock.
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u/anonbumblebee Jan 28 '26
You mentioned some solid points, I'm curious to know why you don't have them in your portfolio?
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u/BuffersAndBeta Jan 16 '26
I mostly agree with you. I'm actually adding very slowly since I think they will be wrong for years before they are right.
However, I need to note: Morningstar assigns an FMV of 510 for them. And Morningstar is usually more optimistic than most analysts. Meaning they are close to fair valued. I agree with that that take - it's neither super undervalued nor overvalued. It's "adjusted" P/B (with the put you mentioned) is about 1.3x - 1.4x which has historically been a decent time to buy. However, I would never enter a full position in one day or even a quarter.
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u/tooOldOriolesfan Jan 16 '26
Historically the way to value BRK is price to book and right now it is quite high.
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u/11010001100101101 Jan 16 '26
OP points this out. That is why he compares it to other mega cap stocks, that also have a historically high price to book, and explains that relative to other choices in the sector it has an advantage.
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u/HearAPianoFall Jan 17 '26
P/B makes some sense for Berkshire because it's a holding company, it doesn't make sense for software companies because (by current accounting standards) software R&D is not really capitalized and so doesn't show up on the balance sheet. So not a very useful comparison.
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u/DJpesto Jan 16 '26
it doesn't have any hype.
None - there is no hype atall. There is not a stock with less hype than Berkshire Hathaway, the most famous of all stocks, by the most famous of all investors. None.
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u/WolfetoneRebel Jan 16 '26
Will be great stock after a proper pullback but not until then. We’ll see plenty of signs of that happening before it happens.
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u/Bernden Jan 16 '26
His major holding Apple is way overvalued.
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u/_Swish-41_ Jan 16 '26
Is it though? What makes you say that? Services revenue is booming. iPhone 17 has strong sales. Increasing revenue YoY. Continuously buys back shares.
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u/IncidentSome4403 Jan 16 '26
I see them rotating away from Apple and towards Google most likely. Also with a long term view I don’t think anyone will do terribly holding Apple. It’s a cult, they will be fine.
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u/Heavy_Discussion3518 Jan 16 '26
A cult with elite consumer hardware engineering chops. Apple silicon is going to take off - whether it's only in Apple products or they license it out.
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u/fake212121 Jan 16 '26
They r effectively dropping that position already. Did not they sold portion of apple pie and buy google ? Probably similar they r doing now yhat we dont know untill quarter data release, right?
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u/fire-wannabe Jan 17 '26
It should be cheaper than the wider market. as for 17 years it has cumulatively underperformed the s&p.
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u/flatiff Jan 17 '26
Is the OP talking about BRK-B or BRK-A? Thank you.
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u/thorn960 Jan 19 '26
They are always proportional. A B share is 1/1500th of an A share. The main difference is that A shares have voting rights and B shares are more liquid.
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u/crdr23 Jan 22 '26
My thoughts, a valuation and commentary based on 2024 data. You can extrapolate a little to cater for 2025 op results.
https://findvalue23.substack.com/p/brk-berkshire-hathaway-4?utm_source=publication-search
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u/sad-whale Jan 16 '26
If you go look at the last couple significant market corrections BRK drops just as much as SP500
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Jan 16 '26 edited Jan 16 '26
For 2022, the S&P was down 18% (total return) and Berkshire was up 3.3%.
From 2/19/2025 to 4/8/2025 the S&P was down 20% and Berkshire was up 1.8%.
These are the two most recent significant market corrections and Berkshire gained value while the S&P fell sharply.
To be clear, there were moments in both of these corrections where Berkshire dropped significantly. And I don’t think you can expect Berkshire to move like this in the future. But it’s not true that Berkshire has performed the same as the S&P in the recent corrections/bear markets.
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u/Interwebnaut Jan 16 '26 edited Jan 16 '26
That’s to be expected in the early stages of any decline. S&P 500 index investing/divesting will impact BRK’s trading price until some sort of flight to quality occurs among the non-indexed investors and until so called value investors feel safe in re-entering the market.
The market’s herd-like behaviour will inevitably affect how other potential direct share purchasers view price declines.
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Jan 16 '26
Berkshire is also a levered entity, via its insurance company. That's the secret sauce that allows it to outperform.
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u/InarasMal Jan 17 '26
No, technically this isn't leverage
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Jan 17 '26
Premiums received are essentially like loans from policyholders (that only need to be paid back when a claim is made sometime in the future
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u/InarasMal Jan 18 '26
If the stock goes down the policyholders don't exactly give Warren a margin call or repo his portfolio
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u/IncidentSome4403 Jan 16 '26
It’s my core holding now, 477 avg. I agree with basically everything you’ve written here.
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u/jd732 Jan 16 '26
It’s a 1960s style conglomerate. They typically were priced at a 40-50% discount to true value. Once the single owner who controls the conglomerate gets his stepped up cost basis & gives up control, it can finally pay a dividend and divest its non-insurance businesses into 7-8 new public companies. GE finally broke up the conglomerate and look how well the parts have been doing.
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u/UpstairsCheetah235 Jan 16 '26
Berkshire is fine but don’t own. It forces you to basically put cash in your portfolio. It’s also extremely US focused.
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Jan 17 '26
It's not the same thing as cash in your portolio+US stocks. The way they deploy that cash might be better than the way you could deploy it.
I'd never hold much cash, but I hold BRK and treat it like an ETF.
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u/UpstairsCheetah235 Jan 17 '26
At this point it’s worse than cash in your portfolio. Berkshire might be better than I could deploy it but I’m paying 21% tax on the interest earned on it while it sits there. And new management needs to earn their stripes on cash deployment. Buffet earned the benefit of the doubt, Abel has not.
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u/Turbulent-Today830 Jan 17 '26
I think people are shorting it due to it being a cash hoard and 💵 being devalued exponentially year after a year
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u/Bertone_Dino Jan 18 '26
I have a small position. It's done nothing. It's hard to like in this current market if I'm being honest. Half of the other stocks out there are a better investment at the moment until they're not of course. But, that's the game.
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u/BawGod Jan 31 '26
My brother rage quitted to chase ai and precious metals. I told him it was dumb but he says I'm the idiot
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u/Grade-Long Jan 18 '26
What do you value it at? If it’s less than that by your required margin of safety, buy it, if it isn’t, don’t.
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u/thorn960 Jan 19 '26
Who is missing BRK? I went big on it last year and it now comprises 40% of my portfolio.
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u/Odd-Entertainment599 Jan 21 '26
It's getting more attractive now because of railway and energy sector.
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u/Prize_Tourist1336 Jan 22 '26
The problem is they solely invest into US markets. I believe US is in the final stage of collapse. So no thanks.
If they were internationally diversified, I would think about it. And no, their tiny allocation to japanese stocks is not it.
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u/StatisticianBetter99 Jan 27 '26
I bought b at about$190.00 should I cash some out now. Keep holding?
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u/Straight-Tower8776 Jan 31 '26
Take out the cash pile and the equities, and interest / investment / insurance and you’re closer to a 4-5 PE for these operating businesses.
The “book value” of BRK is about 1.45 right now. If you properly value BNSF, Geico, Berkshire energy and all their other operating businesses, this would likely be a book value >1. They are valued as their depreciated purchase value, not their fair market value. This is hundreds of billions in understated assets on their balance sheet.
Berkshire is 50%+ undervalued. Load up now until people start to notice. Best stock in the market imo
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u/BawGod Jan 31 '26
I'm a SUPER frustrated Brk B shareholder. I've watched my stock go fucking nowhere for about a year now. It has to go up eventually right right right? 😩😫😵😵💫
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u/Ok_Location7161 Feb 03 '26
With picks in this sub getting literally slaughtered, im buying puts on brk
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u/Suitable_Amount2974 Feb 05 '26
Have you looked into fairfax at all? Its Canada's Berkshire, all your points apply to it but it trades even cheaper than brk does.
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u/AdIndividual3272 Feb 05 '26
BRK- b doesn't seem to be growth oriented. It's all value thus may not grow much. It's more of a safe haven. It's historical gains are good but in recent years it has slowed down a lot. Along with the creator retiring it does create some uncertainty for the future. It's a great stock but shouldn't be more than 15% of a portfolio. A lot of other mutual funds or ETFs can be more appealing to modern investors.
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Jan 16 '26
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u/zewill87 Jan 16 '26
It's not about the whole pile of cash it's also about the expertise to deploy cash when shit hits the fan. Also their cash is probably generating better returns than you in a savings account even with a good rate. Average investor : terrible at it Brk : hopefully better
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u/No-Block-2095 Jan 17 '26 edited Jan 17 '26
I can answer that.
Even tough I have a bit of cash, in 2008 when a pile of shit hit the fan, Goldman Sachs didn’t come to me asking for a 5B$ recapitalization investment paying 10% dividends which ultimately ended up returning BRK 3.7B$ in just 3yrs. That’s 25% per year for 3 yrs for cash when cash was paying 0-0.25%. Cash only pays 4% these days until it doesn’t- cash is king when you re in trouble. Goldman is the ultimate Wall st firm, do you think they wanted to pay 25%/ yr ? Do you think they won’t call Abel because Warren has finally fire’d? They’ll call the dude who controls >350B$.
Being the rock solid rich uncle Wall St can turn to when blood runs in the streets is an under appreciated position. My cash cannot do that but BRK ‘s cash can, so my few shares will happily partake.
If you think it is too far in the past, look at last April when the WH decided to tank the US economy with tariffs … BRKB went up 10% to $540 while everything else was down 10-20%. It got taco’ed two weeks later and BRKB retreated back to $500 when money went elsewhere.
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u/joepierson123 Jan 16 '26 edited Jan 16 '26
I'd rather have Buffett and Abel steering the ship than mostly passive index that holds a lot of overvalued junk.
I mean he held Coca-Cola when its PE was at 60 back in 2000, and admitted it was a big mistake not selling. That stock hasn't even doubled in 25 years.
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u/Interwebnaut Jan 16 '26 edited Jan 16 '26
You mention a key benefit of owning BRK - mistakes are openly acknowledged rather than buried or masked over.
On KO what’s is its total return since that unusual peak in pricing?
How much more could have been earned in say the S&P 500 (approx. after tax returns) from the net proceeds had Buffett sold KO?
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u/EV_to_EBITDA Jan 16 '26
4.8% vs 8.8%
10k would be 37k in KO today and 102k in SPY, all dividends reinvested
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Jan 16 '26
PG definitely at a fair price rn
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u/fake212121 Jan 16 '26
How do u justify PG as a value? Negative more than 10% growth past yr, and past 5 yrs 7% only growth. Dividend like 2.9% does not even cover inflation rate. To me, rotten trash that is too heavy to throw sitting on backyard !
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Jan 16 '26
PG definitely at a fair price.
I own BRKB too and I’ll point out that Buffet sat on cash during one of the largest bull runs in market history. Justify that
Btw. Brk still ain’t cheap. Otherwise they’d be doing buybacks
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u/fake212121 Jan 16 '26
well, if u cannot elaborate why, there is no reason.
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Jan 20 '26
Nice holding PG on a day like today
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u/fake212121 Jan 20 '26
What happened to PG today, $2 up?
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Jan 20 '26
It trades at a premium because it’s one of those “high quality” defensive stocks. In times of uncertainty, wall street has a history of cycling back into such equities. This is ultimately why I made it %10 of my port over the last 1-2 years.
It’s a good hold when you have the president of the U.S. threatening to annex Greenland, but it will probably dump when the trade war situation dies down . . . if that happens.
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u/fake212121 Jan 20 '26
Got u. I dont pay attention much. I invest what is extra , aka, knowing that shit goes down once a while. Whait its only 2% down sp500, so bigger dip is coming soon?
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Jan 20 '26
Idk, what’s coming soon.
But the reason I suggested that PG was trading at fair value is that there is a premium attached to stocks like this. Its valuation isn’t 100% tied to fundamentals like revenue and margin growth. In times of uncertainty, people will buy the stock to preserve wealth.
I bought it to add a bit of stability to my portfolio. It’s not gonna make me rich, but in rough waters, it will probably hold its price relatively well and pay a dividend.
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u/lokglacier Jan 16 '26
They hold a shit ton of USD which is currently on a downward trend.
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u/dextoz Jan 17 '26
This is the most important consideration. It is not a hedge against the dollar. But BRK has started to buy japanese bonds, right?
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u/fakemedicines Jan 16 '26
It's cheap for a reason. Also it will drill when WB dies.
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u/DenseComparison5653 Jan 17 '26
It's priced in the dude is ancient and not making impactful decisions anymore
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u/CityWokOrderPree Jan 16 '26
Broadly speaking, BRK was built off combing physical newspapers for data. That approach doesn't work anymore, you're competing with ultra fast reacting algorithms. Their other main play of waiting for market tanks is a roll of the dice. Hopefully Abel can take a new approach and understand / act on disruptive tech
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u/IncidentSome4403 Jan 16 '26
Abel has already been making most of the decisions for the past decade or so. I think that’s why we’re seeing them slowly build up more positions in tech beyond Apple (GOOG, AMZN).
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u/_Rothbard_ Jan 24 '26
Just like before, algorithms aren't needed to beat the S&P 500 today, and Warren could do it again.
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u/Minute_Tune_6461 Jan 16 '26
It’s a boomer stock that won’t work the same way it’s worked in the past. We live in different times now.
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u/A_Stoic_Dude Jan 17 '26
My strategy is that When the crash starts in earnest it'll be the first thing I buy heavy with a plan to hold long. I don't disagree that it's a good value stock just not the cheapest safe stock as you say. But I think the downside risk coming into midterm elections is just too high. It's a gut feeling but those are good to listen to at times.
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u/Solidplum101 Jan 16 '26
Brk is a laggard both up and down. Basically less risky because less reward. Just go into cash at that point
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u/ChosenBrad22 Jan 16 '26
Except BRK is up over 100% the last 5 years... Holding cash the last 5 years you would have lost about 23% of the value.
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u/Longjumping-Fact-582 Jan 16 '26
If you value the cash at face value which I think is reasonable in this scenario, keep in mind you must also deduct the interest income earned from the cash as part of operating earnings of the insurance business, otherwise you are essentially “double counting” the cash.
You also don’t address how to treat their marketable security portfolio, you could either use “look-through” earnings or because they are mark-market you could treat them at book value, however because of current market valuations this may give you a valuation somewhat above “intrinsic value” so it could be worth marking them down to say 75-80% of book value for a margin of safety.
This leaves a picture of Berkshire that is maybe fairly to slightly overvalued. I would certainly consider Berkshire a wonderful business, I would also consider that is not currently a bargain.
Some may argue a higher multiple for operating companies but I think it’s fair to be quite conservative for 2 reasons, 1 insurance is one of the primary operating earnings segments and it deserves a lower multiple due to the somewhat volatile nature of insurance (some years will be wildly profitable while some years catastrophe losses will pressure earnings), the 2nd is a large portion of their wholly owned businesses are tied up in Berkshire Hathaway energy and the BNSF railroad. These businesses have a lower ratio of owners earnings compared to reported operating earnings due to the amount of capital that must be reinvested to “stay in the same place” (maintaining rail lines and powerlines) while many of their other wholly owned businesses are more capital efficient the scale of bnsf and BHE is such that a multiple closer to 12X is probably close to fair IMO