This Is The Ultimate Warren Buffett Stock, But Should You Buy It? (2024)

Warren Buffett is widely regarded as one of the greatest investors of all time. One way to share in his success is to invest in his firm, Berkshire Hathaway (BRKB). But is Berkshire a good buy for you now? Let's take a close look at the fundamental and technical performance of the ultimate Warren Buffett stock.

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Berkshire Hathaway is a conglomerate that owns some of America's most famous firms. It wholly owns the likes of Geico, Duracell, Dairy Queen, Fruit of the Loom and railroad operator BNSF.

Berkshire Hathaway is perhaps more famous for serving as an investment vehicle for Warren Buffett and his top lieutenant, Charlie Munger. Following their value investing philosophy, the company owns huge stakes inAmerican Express (AXP),Coca-Cola (KO) and other heavy hitters.

But the definition of a Warren Buffett stock has evolved in recent years.

Under investment managers Todd Combs and Ted Weschler, Berkshire Hathaway has been increasingly sinking money into tech stocks. It's taken large positions in established giants like Apple (AAPL), as well as younger companies like Brazilian payments provider StoneCo (STNE) and young software firm Snowflake (SNOW). Berkshire has also snapped up a stake in Amazon.com (AMZN).

Berkshire Hathaway Tweaks Portfolio, Sells TSM Stock

In Q4, Berkshire Hathaway sold a large part of its big stake in Taiwan Semiconductor (TSM), the world's largest contract chipmaker. It is a big supplier to Apple (AAPL), his firm's top holding. Berkshire sold 86% of its TSM stock after buying 60 million shares for more than $4.1 billion in the preceding quarter.

In contrast, Warren Buffett added to his position in building products maker Louisiana Pacific (LPX) by 21%, adding 1.249 million shares.

Buffett also increased his bet in the streaming wars by adding 2.420 million shares during the quarter in Paramount Global (PARA). Berkshire now holds a 15% stake. The Paramount+ streaming service is a small but growing rival to Netflix, Disney+ and Amazon Prime.

According to its most recent 13F filing, Berkshire added slightly to the position of top-holding Apple. An additional 333,856 shares brings its total holdings to 895.1 million.

The firm held steady on some of its biggest and oldest holdings, including Bank of America (BAC) and Coca-Cola (KO).

But Chevron (CVX), another big holding, was trimmed back by 2.38 million shares to 162.96 million.

Warren Buffett Buys OXY Stock

But Chevron is not the only way in which Berkshire has energy exposure.

In fact, the firm has been making waves as it builds an increasingly-large stake in Occidental Petroleum (OXY).

Last year, it emerged that Berkshire had snapped up 91.2 million shares in oil giant Occidental Petroleum. It came as the price of oil spiked amid the Russia-Ukraine war. Berkshire bought another 5.99 million shares between Sept. 26 and 28, according to a Sept. 28 filing.

And on March 27, a regulatory filing revealed Buffett had snapped up more shares. He now has a 23.5% stake in the Houston-based energy giant, or roughly 211 million shares.

Last year, Berkshire received regulatory approval to purchase up to 50% of the oil giant.

Berkshire Snaps Up Insurer

In late October, Berkshire Hathaway completed the acquisition of insurer Alleghany.

The firm stumped up $848.02 per share in cash, which equates to a total equity value of about $11.6 billion.

Alleghany, now a wholly-owned subsidiary of Berkshire Hathaway, continues to be led by CEO Joseph Brandon.

Berkshire announced it had received all regulatory approvals relating to the deal on Oct. 14, and it closed several days later.

The deal represented a multiple of 1.26 times Alleghany's book value as of the end of December 2021. It was Berkshire's biggest acquisition in six years.

Besides its main insurance business, Alleghany also owns a steel company and a funeral services firm.

BRKB Stock Technical Analysis

Berkshire Hathaway stock has formed an enormous consolidation with a buy point of 362.20, according to MarketSmith analysis.

Investors may want to wait for a base that offers a lower entry. Shares recently got support at the 200-day line but remain below the 50-day moving average.

The relative strength line has been struggling to make progress after retreating from a 52-week high. This gauges a stock's performance compared to the broader S&P 500. Its Relative Strength Rating of 62 means it has outperformed 62% of stocks in terms of price performance over the past 12 months.

BerkshireHathaway stock held strong in 2022, making a slight gain compared to a loss of more than 19% for the S&P 500. So far in 2023, BRKB has given up nearly 2%. The S&P 500 is up nearly 6%.

All-around performance is not ideal. This is reflected in its IBD Composite Rating of 78 out of 99.

Earnings are improving. EPS grew by an average of 20% over the past three quarters. Investor's Business Daily recommends investors look for companies with average EPS growth of at least 25% over this time period.

Wall Street expects earnings growth to slow for Berkshire Hathaway going forward. Analysts are projecting annual earnings will rise 11% in 2023 and 12% in 2024.

Big Money has been holding steady on BRKB stock of late, which is reflected in its Accumulation/Distribution Rating of "C-".

Warren Buffett Recommendation

Berkshire stock has struggled to outperform the S&P 500 index in recent years despite its outperformance in 2022.

Before that, BRKB stock at best moved with the market for a decade. An investor could have bought an index fund or ETF, like the SPDR S&P 500 ETF (SPY), and generated similar or higher returns with less stock-specific risk.

"In my view, for most people, the best thing to do is owning the S&P 500 index fund, Buffett himself previously said at a Berkshire annual meeting. "If you bet on America and sustain that position for decades, you'd do far better than buying Treasury securities, or far better than following people. Perhaps with a bias, I don't believe anyone knows what the market is going to do tomorrow, next week, next month, next year."

Berkshire Hathaway Earnings

Berkshire Hathaway earnings fell 6% in the most recent quarter to $3.06 per share. This was worse than Wall Street expected.

Operating earnings, which is comprised of profits from its businesses, came to $6.7 billion. This was down 7.9% year over year.

Q4 net earnings fell 54% year over year to $18.164 billion, largely reflecting declines on its investments during the quarter amid broader stock market volatility. In Q4, Berkshire's sold around $15 billion worth of stocks.

However, the firm stresses that stock gains and losses in any particular quarter are "usually meaningless." This fits in with Buffett's longer-term investment philosophy.

Buffett's Cash Mountain Grows

Berkshire's cash pile rose again in the most recent quarter. Berkshire Hathaway cash came in at $ $128.651 billion, up from $109 billion in Q3.

Having such a large supply of cash protects the Warren Buffett stock during tough times. It also means Berkshire Hathaway is able to deploy capital when desirable businesses become available for purchase.

The firm spent approximately $2.855 billion on share repurchases in Q3. In total, it spent almost $8 billion on buybacks in 2022.

The more aggressive buying of Berkshire's own shares of late contrasts with Buffett's deals during and after the Great Recession. But the firm may look to make more deals if a recession starts to make attractive acquisition targets more alluring.

Analysts Mixed On Berkshire Stock

CFRA analyst Catherine Seifert is rating BRKB stock as a hold with a 335 price target. She noted the firm lagged her earnings estimates in the most recent quarter.

"We forecast operating revenue growth of 6% to 9% in 2023, with a rise of 7% to 10% forecasted for 2024, and expect per share results to be aided by buybacks," she said in a Feb. 27 research note. "Currently trading at 19.9x our 2023 operating EPS estimate, with some ongoing near-term profit pressures, we view the dividendless shares as fairly valued."

But UBS analyst Brian Meredith is rating it as a buy with a 371 target. He believes the stock is trading at a "meaningful discount to intrinsic value."

"We continue to believe BRK's shares are an attractive play in an uncertain macro environment," Meredith said.

Difference Between BRKA Stock And BRKB Stock

The most obvious difference between Berkshire Hathaway's A class and B class shares is the price. While at just under 300 per share, BRKB stock may be considered relatively expensive, BRKA stock is the most expensive on the market, currently trading near an astounding $424,500 per share.

Warren Buffett decided to introduce the BRKB shares to allow investors to purchase stock directly. Big demand for Berkshire Hathaway stock forced less-moneyed players to plow cash into unit trusts or mutual funds that mirrored his company's holdings.

Berkshire Hathaway Today

Berkshire Hathaway operates in four main sectors.

Its insurance group is one of its biggest cash cows. One of the most famous jewels in the crown is Geico. Other parts of this business include multinational property/casualty and life/health reinsurance company General Re and Berkshire Hathaway Reinsurance Group. The latter underwrites excess-of-loss reinsurance and quota-share coverage globally.

Insurance operations are a big reason why Berkshire Hathaway earnings can be lumpy.

Its Regulated Utility Business group includes Berkshire Hathaway Energy, formerly known as MidAmerican Energy. It also includes railway services arm BNSF, North America's largest freight railroad network.

Meanwhile, the Manufacturing, Service & Retailing group includes Acme Building Brands, Fruit of the Loom and Justin Brands. The likes of Buffalo News, Business Wire, Dairy Queen and NetJets fall under the service subsector. Retailers include See's Candies, Ben Bridge Jeweler, Helzberg Diamond Shops and Star Furniture.

Finally, the Finance & Financial Products segment includes Hathaway Credit Corporation, transportation equipment and furniture leasing specialists XTRA and CORT, and BH Finance whose main interest is in proprietary investing strategies.

Warren Buffett Names Successor

One of the biggest questions around the future of Berkshire Hathaway in recent years was who would take over the mantle of CEO from Buffett.

The Oracle of Omaha has finally given the answer. He said Greg Abel, who runs the noninsurance businesses, will take over in his stead.

Abel, a Berkshire vice chairman since 2018, had long been viewed by analysts as a possible successor. The Canadian is chairman and CEO of Berkshire Hathaway Energy. He has also been vice chairman of Berkshire's noninsurance operations since January 2018.

The firm has not disclosed the precise timing of Berkshire's leadership turnover.

Is Berkshire Hathaway Stock A Buy Now?

Berkshire Hathaway stock generally lagged the S&P 500 index since late 2017 but managed to handily outperform the benchmark index in 2022. But so far in 2023 it has struggled to make gains.

Berkshire stock currently does not sit near a buy point. Those keen on the stock could consider adding it to their watchlist for now.

While Wall Street sees solid EPS growth ahead for Berkshire for 2023 and in 2024, it still remains shy of the rates sought by CAN SLIM investors.

Bottom line: Berkshire Hathaway stock is worth watching closely by those keen to add the ultimate Warren Buffett to their portfolio. Nevertheless, investors looking for true market leaders should also check out IBD Stock Lists, including theIBD 50 list of top-performing stocks.

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