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

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

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!