Acquiring Berkshire Hathaway Shares: Three Unwavering Motivations for Immediate Purchase
Ditching the idea of only betting on the horse's jockey, let's delve into why buying Berkshire Hathaway stock could be a wise decision for long-term investors as 2024 draws to a close. Here are three reasons to consider giving Berkshire a go, even if the price of a single class A share might make your wallet wince.
1. The Oracle of Omaha
Warren Buffett, the man in the saddle, is no run-of-the-mill jockey. He's been hailed as one of the greatest investors of all time. Since taking the reins of Berkshire Hathaway back in 1964, the stock's overall gain climbed a staggering 4,384,748%, leaving the S&P 500's achievements in its wake.
What's Buffett's secret sauce? His impressive track record extends beyond past performance. His philosophy on managing a business and investing in businesses has made Berkshire's long-term success seem inevitable. His annual letters to Berkshire shareholders are a treasure trove of wisdom, offering insights into the art of investing.
Yes, Buffett will eventually retire, and it's unavoidable to worry about who will take the reins. But let's not forget that Buffett's entire investment philosophy is deeply ingrained into Berkshire Hathaway, ensuring continued success, in my opinion, for years to come.
2. A Bounty of Strong Businesses
Investing in Berkshire Hathaway is not merely a one-horse race – the horse is awesome, too! Berkshire Hathaway is a sprawling conglomerate with nearly 70 subsidiaries and a diverse array of publicly traded equities. There are sizeable contributors like BNSF Railway, Geico, and Berkshire Hathaway Energy, alongside smaller fish like Helzberg Diamonds and See's Candies. However, what these various businesses share is a long-term focus.
Investing in Berkshire Hathaway means flanking yourself with some top-notch equities. Some of the most notable names in the conglomerate's portfolio include Apple, American Express, Bank of America, and The Coca-Cola Company. Being an investor in Berkshire Hathaway means having a premium seat for witnessing these stellar companies' successes.
3. A Fortress of Cash
I usually advise against judging a company solely by its cash reserves, but Berkshire Hathaway is an exception. The company's hoard of cash, cash equivalents, and short-term investments surged to a whopping $325.2 billion in 2024, a luxury of financial security that most corporations can only dream of.
Why does Berkshire's chest of gold matter? It gives Buffett and his team an arsenal of resources to deploy when market opportunities present themselves. The legendary investor historically waits for attractive valuations and steadily growing earnings before making investments, a method that has played a significant role in Berkshire's consistent market-beating performance.
The One Big Red Flag
While Berkshire Hathaway's long-term investment appeal is substantial, there's a single reason you might want to think twice before jumping in: valuation. Berkshire's shares are trading at a lofty 24.6 times forward earnings, a price tag that might cause daunted investors to pass on the opportunity.
Buffett even opted against purchasing back shares in the third quarter of 2024, which is unusual for such a revered investor and could signal his concerns about the stock's current valuation. Some investors might prefer to wait for lower valuations before committing to the shares.
Ultimately, I remain convinced that Berkshire Hathaway is an excellent pick for long-term investors, even with its valuation at the high end. The company's strategic portfolio management, strong performance, adaptive leadership, and financial resilience make it a compelling opportunity for investors seeking lasting returns.
- After analyzing Berkshire Hathaway's financial status, some savvy investors might decide to allocate a portion of their finance portfolio to the company, especially considering its large cash reserves and diverse investments in businesses like Apple and The Coca-Cola Company.
- If you're interested in investing, you might want to consider setting aside some money for this purpose, as Berkshire Hathaway's consistent market-beating performance and investment philosophy, spearheaded by Warren Buffett, could provide promising returns in the long term.
