Is Berkshire Hathaway Inc. a Good Stock to Buy at $200?

Berkshire Hathaway - Is Berkshire Hathaway Inc. a Good Stock to Buy at $200?

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Berkshire Hathaway Inc. Class B (NYSE:BRK.B) stock is trading about 10% off its 52-week high of $217.62. Naturally, investors are wondering if Berkshire Hathaway is a good stock to buy.

At $200, or whatever the price, you might want to answer these three questions before opening the piggy bank.

Is Warren Buffett Buying?

No, he’s not.

The man is 87 years old. Any transactions he’s making are to convert Class A (NYSE:BRK.A) shares to Class B shares in order to donate them to his charitable causes.

Buffett’s most recent transaction came last July when he converted 12,500 Class A shares to 18.75 million Class B shares. He then donated 14.22 million of the Class B shares to the Bill and Melinda Gates Foundation; another 1.42 million to the Susan Thompson Buffett Foundation; and just less than a million shares each to another three charities, including his son Howard’s foundation.

That said, at the corporate level, he’s always contemplating buying Berkshire stock — if the price is right.

Through the years, Warren Buffett’s toyed with the idea of buying back Berkshire Hathaway stock, but really hasn’t had an opportunity to buy back a significant amount of shares.

In 2011, the company announced it would buy back its shares at prices up to 110% of its current book value. It only managed to purchase $67 million worth before moving higher than the self-imposed ceiling.

As a result of the company’s intrinsic value increasing substantially, Buffett raised the ceiling to 120% of book value in 2012, which allowed Berkshire Hathaway to repurchase $1.3 billion of its stock.

In the five years since, Buffett’s hasn’t repurchased more of his company’s stock.

Today, Berkshire Hathaway stock trades at 1.4 times book value, about 17% higher than the company’s share repurchase ceiling.

So, Buffett would be buying at $171.

Are There Better Options?

There are always better options from a value perspective, but probably not with the same quality of earnings.

Of the top of my head, I can think of at least 10 holding companies that investors might consider instead of Berkshire Hathaway. However, back in 2013, I wrote an article entitled 5 Holding Companies Worth Holding.

Here are the current price-to-book ratios of all five:



Icahn Enterprises LP



Loews Corporation



LVMH Moet Hennessy Louis Vuitton SE (ADR)



Grupo Carso S.A. (ADR)



HRG Group Inc



I could go on with other names, but that would be a waste of time because, with the exception of Loews, the other four all have P/B ratios that are much higher — LVMH for instance, owns some of the world’s greatest luxury brands and receives a major premium as a result — and I don’t think the ones I haven’t mentioned are any better.

There is a holding company in Canada run by Prem Watsa, Fairfax Financial Holdings Ltd (OTCMKTS:FRFHF), that trades for 1.2 times book value. Watsa’s often considered the “Warren Buffett of Canada,” with a record to match the Oracle of Omaha, albeit over a slightly smaller number of years.

It’s worthy of your consideration.

Bottom Line on Berkshire Hathaway Stock

Owning Berkshire Hathaway stock is like buying a broad-market ETF or mutual fund. It’s always on list of the best stocks to own for a reason.

Currently trading at 1.4 times book value, I’d buy some now and put aside a ton of cash, which Buffett’s done, for when it drops to 1.2 times book.

Buffett will be buying with both hands should Berkshire Hathaway drop in price to meet the company ceiling; you should be too.

As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

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