Consistency Makes Berkshire Hathaway Stock a Perennial Buy

Warren Buffett has made many of his fans rich through his legendary company, Berkshire Hathaway (NYSE:BRK.B). So it stands to reason that any time is a good time to look at Berkshire Hathaway stock and see whether the performance lives up to persona of the 90-year-old Oracle of Omaha.

A Berkshire Hathaway (BRK.A, BRK.B) sign sits out front of an office in Lafayette, Indiana.
Source: Jonathan Weiss / Shutterstock.com

From playing a ukulele at shareholder meetings to living in the same house he bought in the 1950s, billionaire Warren Buffett is adored by his investor groupies as much as singer Jimmy Buffett is by the Parrotheads.

Let me say this outright: I’m a big Buffett fan and have been for years. His approach combines two bedrock investment principles that have stood the test of time and time again.

First: Buy stocks that are undervalued, where the share price is less than that on the company’s books. And second: Buy a stock and hold it. In fact, Buffett has famously said that his favorite holding period for any investment is forever.

He should know. The guy is 90, which is pretty much as close to “forever” as it gets for us mortals. If you’d rather deal with decades, Berkshire Hathaway Class A (NYSE:BRK.A) cost $7,100 a share in mid-1990. Today, it’s worth $323,275. That is simply astounding. The median price of a home in Omaha is chump change by comparison: $215,000.

Could Berkshire Hathaway stock in its class B version treat investors to a similar rocket ride to Easy Street? As Buffett himself would advise, let’s start with what the numbers say.

A Closer Look at Berkshire Hathaway Stock

Berkshire Hathaway didn’t get hammered nearly so hard at the outset of the novel coronavirus as other publicly traded companies.

It dipped a tad over 29% between late February and late March, which isn’t bad at all when you compare that to the Dow Jones Industrial Average (INDEXDJX:.DJI) losing 36% in the same period, or United Airlines (NASDAQ:UAL) free falling 73%

Better yet, BRK.B has since made back most of what it lost. From its 2020 trough of $163 on March 20, it has jumped by a third to $215. Ask Buffett and he would’ve told you to buy in March, as per this witticism: “When hamburgers go down in price, we sing the ‘Hallelujah Chorus’ in the Buffett household.”

So for those who demand to know “where’s the beef?” look no further. With a market capitalization of $515 billion, Berkshire Hathaway stock has plenty of worth to back up its girth. Over five years, it’s up by 62% — the steady kind of growth Buffett himself looks for in other investments.

Wit and Wisdom at the Top

I’m not quite sure what to make of the four analysts who call Berkshire Hathaway stock a hold. Seriously, what the Sam Hill are they thinking? In the second quarter of 2020, it beat Wall Street targets by 16 cents with earnings of $2.28 per share. But at least no one recommends selling the stock and two label it a buy. My money’s with them.

One thing we must consider is that Buffett will eventually, and likely soon, teach the angels all about buy and hold. Investors get jittery when someone at the top as revered as Buffett surrenders the reins. What’s more, his billionaire Berkshire buddy/partner Charlie Munger is 96 — and will turn 97 on Jan. 1.

Oh, how I wish Munger and Buffet could carry on another two decades and continue putting the fun in “fun and profit.” They’ve famously munched on See’s Candies during shareholder gatherings; it’s a company Berkshire owns. And Munger once quipped: “I always say I want to know where I would die so I can never go there.”

Why Berkshire Is a Buy

No mistake here: Shareholder anxiety will skyrocket when one, then both, pass on. But it’s safe to assume they’ll leave the company in excellent hands. One leading candidate is Ajit Jain, who according to Buffett “has made more money for Berkshire shareholders than anyone else, including Buffett himself.”

Such a pick would likely ensure that Berkshire Hathaway stock will continue on the path Buffett and Munger paved for it generations ago. As for the generations to come, we shall see whether Berkshire Hathaway stock is one of those forever holds Buffett loves. I won’t be around to witness it, of course. But before I cash in my chips, I’ll place my bets.

On the date of publication, Lou Carlozo did not have (either directly or indirectly) any positions in the securities mentioned in this article.


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