3 Reasons to Invest in Berkshire Hathaway Now

As 2024 approaches its end, few investors are likely to purchase Berkshire Hathaway (BRK.A -1.43%) (BRK.B -1.50%) class A shares. The primary reason for this is their astonishing price, which exceeds $715,000 per share.

For those who find this cost prohibitive, class B shares are available for under $500. Investing in Berkshire Hathaway could be a smart decision for long-term investors. Here are three compelling reasons to consider buying Berkshire Hathaway stock without hesitation.

1. Warren Buffett's Leadership

While many people might not support the idea of focusing on the individual behind the company, it's hard to ignore Warren Buffett's remarkable impact as chairman and CEO of Berkshire Hathaway.

Buffett is widely regarded as one of the greatest investors in history. Since taking control of Berkshire in 1964, the stock has achieved an unbelievable overall gain of 4,384,748%, significantly outperforming the S&P 500 index over the same time frame. This trend has continued into 2024, with Berkshire again surpassing the market.

Buffett's past achievements are impressive, but his investment philosophy is even more critical to the company’s long-term success. His annual letters to shareholders provide valuable insights on business management and investment strategies.

Eventually, there will be a day when Buffett is no longer at the helm of Berkshire. Nevertheless, his principles and influence will likely continue to guide the company toward success for many years to come.

2. A Portfolio of Long-term Investments

Investing in Berkshire Hathaway isn't just about backing a successful leader; it's about investing in a diverse range of strong businesses too. Berkshire includes nearly 70 subsidiaries, each with its strengths, contributing to the overall profitability of the conglomerate.

Major contributors to Berkshire's revenue are companies like the railroad firm BNSF, insurance giant Geico, and energy provider Berkshire Hathaway Energy. Smaller companies, like Helzberg Diamonds and See's Candies, round out the portfolio. All these subsidiaries are crafted for long-term stability and growth.

When you purchase shares of Berkshire, you'll also get indirect exposure to around 40 publicly traded companies such as Apple, American Express, Bank of America, and Coca-Cola. Each represents a strong long-term investment opportunity.

3. A Substantial Cash Reserve

While it's not common to cite a company’s cash reserves as a reason to buy its stock, Berkshire Hathaway stands out in this regard. The company boasts an impressive cash position of $325.2 billion, encompassing cash, equivalents, and short-term investments, mostly in U.S. Treasury bills.

This considerable cash reserve allows Buffett and his team to capitalize on market downturns and invest when opportunities arise at attractive valuations. Buffett prefers to invest based on promising earnings growth over at least the next five years, a strategy that has proven effective in generating considerable returns. With the cash stockpile, he is poised to make investments that are likely to continue driving Berkshire’s growth in the future.

Is Berkshire Hathaway a Good Buy Right Now?

While there are many advantages to buying Berkshire Hathaway stock, one significant reason not to invest at this moment is its current valuation. Shares trade at approximately 24.6 times forward earnings, which is relatively high.

Interestingly, even Buffett opted against buybacks during the third quarter of 2024, something that is atypical for him. His hesitance to repurchase shares might hint at concerns about the company's valuation being too high at present.

Some investors might wish to wait for a more attractive valuation before diving in. Nevertheless, for those looking for a solid long-term investment, Berkshire Hathaway remains a strong choice.

Investment, Buffett, Subsidiaries