Berkshire Hathaway

My second post is dedicated to the most famous company within the value investor scene: Berkshire Hathaway (BRK.A and BRK.B). The company is run by the successful value investor Warren Buffett together with his genius partner Charlie Munger. I’m a big fan of both.

There is already so much information about the company on the web. Therefore I will just try to highlight the key facts:

  • An annual return of nearly 20% which means $ 1,000 invested in 1964 are worth today $ 11.6 Million or $10,000 Dollar invested in 1990 would be worth today around $ 300,000. (so putting $10K for the birth of your child in Berkshire would provide a good base for your kids college).
  • The graph speaks for itself:

BRK vs SP500

Graph from google finance: Berkshire Hathaway from 1990 till today vs. S&P 500

  • It is a multinational conglomerate  company which wholly owns companies like Geico, BNSF, Lubrizol, Fruit of The Loom and has significant stakes in Wells Fargo, Kraft Heinz, Coca Cola, IBM, American Express, Phillips 66, Procter & Gamble, Wal Mart, U.S. Bankcorp, GM, AT&T, etc.

Pros:

  • Outstanding management team and philosophy.
  • Phenomenal historical performance.
  • Holds many non cyclical companies which lowers volatility and share price drops during recessions.
  • Very diversified.
  • Value focus.

Cons (if there are any):

  • Large exposure to the US market and US Dollar (although most subsidiaries are global players).
  • No dividend payments (Which is a positive thing in my opinion as money is reinvested wisely reducing tax liabilities but for investors who need cash flow it is negative and therefore listed here.).
  • Replacement of the leadership team can bring some uncertainty about the future development of the company (Successor already resolved).

A stock which shouldn’t be missing in a long term portfolio. Disclosure: Long BRK.

Some interesting analysis:

The author of this seeking alpha article values Berkshire B Shares (BRK.B) with $180 given the company a margin of safety of 27% using todays market price and a PE of 11.6..

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