Berkshire Hathaway (BRK.A 1.59%) (BRK.B 1.56%) is a massive conglomerate with operations in the finance, industrials, utility, energy, and consumer sectors. You really can't think of it as you would a traditional company, but that's why it could be a compelling investment right now, as the market gets turbulent. Here are three reasons you might want to buy Berkshire Hathaway despite the market sell off.
1. Berkshire Hathaway is run by Warren Buffett
Warren Buffett is one of the most famous investors in Wall Street history and for good reason. Berkshire Hathaway, which he runs, has beat the S&P 500 index (^GSPC 1.81%) by a wide margin over time. That fact is nice, but it isn't the whole story. The key here is that Buffett's investment approach is what has driven that strong performance.
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As noted above, Berkshire Hathaway is a conglomerate with a shockingly wide array of business lines. That's because the company is Buffett's investment vehicle. When you buy the company you are actually hiring Buffett, also known as the Oracle of Omaha, to invest your money for you. To be fair, it isn't just Buffett, he has a team that works with him. But the massive scale of Berkshire's portfolio makes it more like a mutual fund than a traditional corporation.
The market may be in turmoil today, but that's exactly when you might want to have a skilled investor looking out for your money.
2. Buffett and his team have been raising cash
At the end of 2023 Berkshire Hathaway was holding around $168 billion worth of cash and short-term investments on its balance sheet. By the end of 2024 that figure had grown to $334 billion or so. That's nearly twice as much cash!
Buffett hasn't said much about the reasoning for raising cash, but it would be easy to think he did it because of concerns about the market's lofty valuation. That type of foresight is something that many would attribute to the Oracle of Omaha. Even if it was just dumb luck, however, having all of that cash gives Berkshire Hathaway a great deal of leeway to weather adversity.
BRK.A Cash and Short Term Investments (Quarterly) data by YCharts
When times get tough on Wall Street, especially if there is a risk that the economy could fall into a recession, it is better to be in a strong financial position. Berkshire Hathaway is in exactly that position today thanks to its cash raising efforts throughout 2024.
3. Buffett has a value bias and tends to be an opportunistic buyer
Buffett and his team are skilled investors. They have positioned Berkshire Hathaway to weather adversity thanks to a large cash hoard. But they are also value oriented investors. Given that they prefer to buy when stocks are cheap, a market sell off is an opportunity to find investing bargains.
NYSE: BRK.A
Key Data Points
There's a bit of a caveat here, however, since Berkshire Hathaway has a trillion dollar market cap. Little acquisitions just won't move the needle very much. So Buffett and his team will likely wait until they find a large and attractive opportunity to put all of that cash to work. There's no telling when this might happen, but it will be a big news event when it does. Until that point, however, Berkshire Hathaway's cash will still provide a comfy financial backstop that should help shareholders sleep well at night.
What you are buying is a company with the wherewithal to make a big, growth minded capital commitment at a time when other companies are likely to be pulling in their horns. That's attractive if you, like Buffett, have a value bias.
Think long term and hire a good investment manager
Berkshire Hathaway's shares have gotten caught up in the market volatility, which isn't surprising. But don't be frightened away from buying it because it isn't your typical company. The long-term track record is incredible, which is largely because of Warren Buffett and his team's investment approach. The team currently has a large cash cushion to ride out the storm on Wall Street. And that cash also gives Buffett the opportunity to make a big investment, when the time is right, to support long-term growth. If you think in decades and not days, you should probably consider hiring Buffett's team by buying Berkshire Hathaway's stock.
