Opinions
Andrey Omelchak
Berkshire Hathaway Inc. (B)
BRK.B-N
BUY ON WEAKNESS
Apr 01, 2025
Stock price when the opinion was issued
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The conglomerate managed by Warren Buffet is a good flight to safety. We like that cash reserves are growing, while debt is reduced and shares bought back, and it supports an 18% ROE -- solid management. We recommend setting a stop-loss at $400, looking to achieve $535 -- 18% upside. Yield 0%
(Analysts’ price target is $497.67)Not 100% correlated to the S&P, so tends to have a slightly different profile. And yet, it's a way to play the US markets on a fairly broad basis. Won't necessarily have all the downside if the market falls. In an uptrend, though it's pulled back just like everything else. Worth picking up anytime it pulls back to the trendline. No dividend.
It's one of those things you really can hold on to for a while, and he holds onto hardly anything.
Buffett holds $300 billion, but he's holding some serious stock positions. It's great to ride along with one of the greatest investors of all times, and the extra cash provides a hedge. If there's a dip, Buffett is in a great position to buy. He expects a dip, but not a crash. Recent earnings season was overall positive.
Going back to 2008, chart shows a beautiful long-term channel, trading between book value and 1.5-1.6x book. Today it's at 1.6x book, so it's very expensive.
Be aware that the market's are also very expensive, and this one goes up and down with the market. What stands out is that about 1/3 of Buffett's portfolio is in cash. If an investor were buying cash, he'd want to buy it at book, not 1.6x book. So, discounting the cash, you find that the stock is 18% overvalued.
The 1/3 cash position gives investors a hint as to what they should be doing with their own portfolios. Cash is a call on cheap stocks in the future. Wait for an opportunity.
It's doing very well in this environment, given their cash level and reputation. But they trailed in 2023-4 when they were building that sword. A two-edge sword. If there's a recession, this will look very good, but if this is a typical correction and return to new highs, we'll see what they do to the cash. Buffett probably has one or two targets in his sights.
Best capital allocator in the world, and probably the best investor of all time. Sitting on a record pile of cash. Be cautious, as it's exposed to the equity markets. Built to withstand the storm. Long term, takes advantage of unique opportunities in the market. Well positioned to outperform the broader market over an extended period of time. High faith in succession plans.