/cmdtyView%20Stock%20Photo%201.png)
Berkshire Hathaway (BRK.B) is among the few large-cap stocks that have managed to consistently outperform the S&P 500 Index ($SPX) over time. Berkshire Hathaway is a diversified holding company that owns businesses across verticals, such as insurance, energy, rail transportation, retailing, and manufacturing.
Moreover, Berkshire owns significant stakes in companies such as Apple (AAPL), Occidental Petroleum (OXY), American Express (AXP), and Coca-Cola (KO). Warren Buffett, the chairman of Berkshire Hathaway, is called the “Oracle of Omaha” for his legendary investing prowess, and is arguably the greatest stock market investor in the world.
In the last 30 years, shares of Berkshire Hathaway have surged close to 1,700%, turning a $1,000 investment into $17,860 in this period. Comparatively, the S&P 500 Index has returned 1,240% since June 1994.
Let’s see if Berkshire Hathaway is the best Warren Buffett stock you can buy right now.
Berkshire Delivers a Strong Performance in Q1 of 2024
Berkshire Hathaway announced its Q1 of 2024 results last month, and reported an operating profit of $11.22 billion, up 39% year over year. The insurance underwiring segment reported earnings of $2.6 billion, up 185% from $911 million in the year-ago period. Geico’s earnings rose from $703 million to $1.93 billion, while insurance investment income soared 32% to $2.5 billion in the March quarter.
The conglomerate’s railroad business earned $1.14 billion, marginally lower than in Q1 of 2023. Comparatively, earnings from Berkshire’s energy business almost doubled from $416 million to $727 million in the last 12 months.
Investors should note that Berkshire’s net earnings include variations related to its equity investments, and this metric narrowed by 64% to $12.4 billion. According to Buffett, unrealized investing losses or gains are misleading and should be taken with a pinch of salt.
Berkshire Hathaway Ended Q1 with $188.99 Billion in Cash
Berkshire Hathaway reported a cash balance of $188.99 billion in Q1, up from $167.6 billion at the end of 2023. This suggests that Warren Buffett believes there is no suitable acquisition target and that the public equity market is overvalued at current levels.
Moreover, Berkshire trimmed its stake in Apple by 13%, which Buffett attributed to the currently favorable tax rate. Apple, however, remains Berkshire’s largest stock holding. Berkshire repurchased shares worth $2.6 billion in Q1, up from $2.2 billion in Q4 of 2023.
It seems that Warren Buffett has kept some dry powder in hand and will likely wait to invest it in companies that enjoy a competitive moat while trading at a cheaper multiple.
What is the Target Price of Berkshire Hathaway Stock?
Despite its outsized gains, Berkshire Hathaway stock trades at a reasonable forward price-to-earnings multiple of 21.5x, which is quite cheap. Comparatively, analysts forecast adjusted earnings to grow by 23.3% annually in the next five years.
Out of the four analysts covering BRK stock, two recommend “strong buy” and two recommend “hold.”
Argus Research recently upgraded Berkshire stock to “Buy” from Hold,” citing its diversified line of businesses, impressive track record, and attractive valuation. The investment firm has a 12-month target price of $480 for Berkshire stock, more than 15% above current prices.
The average target price for Berkshire Hathaway stock is $490, indicating an upside potential of 18.2% from current levels.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
