Berkshire Hathaway – Warren Buffett’s Investment Vehicle
(Ticker Symbol on NYSE: BRK.A and BRK.B)
Even though I started learning about value investing by listening to and reading about Warren Buffett, I never invested in his company, Berkshire Hathaway, Inc. I also never wrote about it. It was just never cheap enough for me to consider. I always find other companies that are more opportunistic than Berkshire. With that being said, this does not mean that I don’t follow the man or his company.
A few weeks ago, I was reading various commentaries about how Buffett was just sitting on $125 billion of cash. A lot of people were criticizing him. Well, I bet they are not criticizing him anymore. Now, he is like a kid in a candy store where everything is falling in price and he has $125 billion to play with. This must be an incredible feeling.
Berkshire is a holding company that owns subsidiaries engaged in a large number of diverse business activities. The most important of these are insurance businesses conducted on both a primary basis and a reinsurance basis, a freight rail transportation business, and a group of utility and energy generation and distribution businesses. Berkshire also owns and operates numerous other businesses. In addition to this, the company also owns a portfolio of stocks.
The company has two classes of stocks: A and B. If you are a millionaire, you can buy Class A stock, which now costs $240,000 per share. If you are like the rest of us, you can buy Class B stock for $160 per share. It does not make any difference. The coronavirus made the shares go down by only 30 percent to a market capitalization of $390 billion.
The other reason why I like Berkshire at this level is the man himself. As I said before, Berkshire is sitting on $125 billion of cash. You know Buffett is buying because panics like this are what he lives for. While everybody else is running around like chickens with their heads cut off, he is jumping around like a little kid. This is probably the last time he will experience such an opportunity considering he is going to turn 90 this year. He is already a legend, but this crisis is going to make him a legend of epic proportions.
I don’t even care what he is buying. I know that whatever it is will make Berkshire shareholders a lot of money. So, this $125 billion alone will very likely be worth $400 billion in five years (today’s market cap is $390 million). This is in addition to all the other businesses inside Berkshire. So really, Berkshire is an obvious buy. Don’t even think twice, just buy it. If it goes lower, buy more. The only reason you shouldn’t be buying is if you have something better to buy.