Is Berkshire Hathaway Inc. (BRK) a Good Investment?

Page 1 of 2

When most investors hear Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B), they think of Warren Buffett (see Buffett’s favorite stock picks), and rightfully so, but it’s important to note that the company has interest from other major players in the hedge fund industry as well. According to our records, 52 of the 400+ hedgies we track hold long positions in Berkshire’s class A and B shares, including Ravenel Boykin Curry III’s Eagle Capital Management, Charles de Vaulx’s International Value Advisors and Crispin Odey’s Odey Asset Management (see all of Crispin Odey’s stock picks).

In fact, in the latest round of 13F filings from the SEC, we found that Berkshire Hathaway’s B shares saw some extremely bullish activity from Ken Fisher (+20,571%), Whitney Tilson (+1,790%) and Israel Englander (+507%), each upping their stakes considerably from one quarter earlier (see all of the hedge fund interest in Berkshire Hathaway).

The logical question that must be asked is: should individual investors monkey these big-timers into Berkshire Hathaway?

Due to the impracticality of owning Berkshire’s Class A shares, which currently trade in the neighborhood of $142,300 a piece, we’ll focus on the Class B shares in our analysis. This class of shares trade at roughly 1/1,500th the value of its more expensive counterpart, and were originally created to prevent investors from turning to unit trusts. Over the past decade, shares of Berkshire’s Class B shares have returned 102.5%, and Berkshire’s Class A shares have returned 101.8%, so the appreciation has been nearly identical.

BERKSHIRE HATHAWAYWith that being said, at its current price level, Berkshire’s Class B shares give value investors a decent play at the moment. The stock sports a trailing earnings multiple of 16.7x, which is below Berkshire’s five-year historical average (18.9x) by a moderate margin. Class B shares currently trade at a fairly attractive book multiple of 1.2x, which is the most important metric to consider when analyzing this stock. Berkshire’s has traditionally traded at a premium of 45-50% to book since 2003, close to twice that of current levels.

One particular Buffett-esque ratio we can use is earnings yield, which simply indicates a company’s earnings as a percentage yield of its price. At current prices, the earnings yield of Berkshire’s B shares is 6.0%, far above the yield of a 10-year Treasury (1.9%), which is the common yardstick employed by the Oracle himself. More importantly, this earnings yield is higher than the 5.7% yield that shares have averaged over the past decade. Interestingly, Berkshire’s Class A stock sport an earnings yield near 5.7% as well, indicating that its cheaper counterpart may in fact be the better buy at the moment.

So what about the specific companies within Berkshire’s actual portfolio?

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!