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
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Top Reasons For Getting Fired

The 3 Best States to Start an LLC

10 Jobs That Allow You to Travel

7 High-Paying Jobs You Can Do From Home

12 Best Cities to Shop in USA

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

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!