of stocks Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) It has risen by over 990% since the beginning of the 21st century, far exceeding the total rate of return assuming dividend reinvestment. S&P 500 The index has risen 480% over the same period. After such a long string of impressive outperformance, does it make sense to buy Berkshire Hathaway shares? The answer is neither yes nor no. Here are some things to consider before making a final decision.
Berkshire Hathaway isn’t a typical company.
Most of the companies we look at operate in a fairly narrow business line or one sector. Some are conglomerates and operate in several business lines or sectors. Berkshire Hathaway is like a conglomerate on steroids, operating in sectors such as finance, energy, utilities, transportation, retail, construction, and manufacturing. Believe it or not, this is not a complete list, and in some sectors, the company owns multiple businesses.
In addition, Berkshire Hathaway invests in other companies, where it owns a small portion of the company but does not control it. Largest holdings include apple, coca cola, American Expressand ChevronBerkshire Hathaway is a pretty hard company to keep track of because there’s so much going on behind the scenes, and you just have to trust that management is on top of the important stuff.
In many ways, Berkshire Hathaway is more like a mutual fund than a traditional corporation. From that perspective, there is no good or bad time to buy shares. What matters is that you believe in the way the company is run.
Who runs Berkshire Hathaway?
If how Berkshire Hathaway is run is your most important factor, then, as with any mutual fund, you’ll want to know a bit more. CEO Warren BuffettBuffett is perhaps one of the most famous investors of all time, and certainly one of the best-known in modern times, and his approach was shaped by some of the most famous investors of all time, including value investor Benjamin Graham and growth investor Philip Fisher.
To very simply explain Buffett’s approach, he likes to buy good companies at the right price, then monitors management to make sure they’re doing a good job. He only gets involved in the running of a company when there’s a good reason to do so, which could include dealing with prolonged underperformance or helping to fund the company’s growth plans. Broadly speaking, this approach is consistent across both the businesses he owns and his stock portfolio.
One thing Berkshire Hathaway doesn’t do is pay dividends. This is because Buffett wants to keep as much cash as possible in the company so he can invest it. Given the long-term success of this company, many investors probably don’t mind. However, if your investment goal is income, Berkshire Hathaway is not the right stock for you.
However, if you want to invest with the “Oracle of Omaha” because of his incredible success, Berkshire Hathaway should be in your portfolio. The best option for most investors is probably the B class. Each Class A share is equivalent to 1,500 B shares, lowering the cost of owning Berkshire from a staggering $610,000 per share to a much more reasonable $400. Obviously, it will be easier for most small investors to buy the B shares.
Hard-to-track stocks
Berkshire Hathaway is an easy company to understand because in some ways it is very similar to a mutual fund. But in other ways it is one of the most difficult to understand because it is difficult to keep track of all the businesses under the Berkshire Hathaway umbrella. If you simply trust that Warren Buffett and his team will continue to perform at a high level going forward, this stock may be a good fit for your portfolio. If you want income or a deep understanding of all the investments you own, you may want to avoid this stock. Essentially, it depends. And the key variable is not Berkshire Hathaway but your own investment preferences.
Should I invest $1,000 in Berkshire Hathaway right now?
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American Express is an advertising partner of The Ascent, a Motley Fool company. Reuben Greg Brewer The Motley Fool has no investment position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple, Berkshire Hathaway and Chevron. The Motley Fool Disclosure Policy.
Is it too late to buy Berkshire Hathaway stock? Originally published on The Motley Fool
