Berkshire Hathaway (NYSE:BRK.B) is a strange animal in the stock market. For those who don't believe me, just ask one simple question: “When was the last time I used a Berkshire Hathaway product?”. It's not what anyone would call an immediately recognizable name, but Berkshire Hathaway—whose founder, Warren Buffett, is likely better-known than his own company—is making some substantial moves on the strength of what it does best: investing.
The Value of an Asset
Berkshire Hathaway reported its fourth-quarter profit recently, and by virtually any standard, the numbers were phenomenal. The company posted fourth-quarter operating earnings of $5.02 billion, which is up 14% from the fourth quarter of 2019. Net earnings, meanwhile, came in at $35.84 billion, which breaks down into a per-share figure of $23,015 per class A share. Earnings for class B shares, meanwhile, were significantly lower but still admirable at $15.34 per share, up substantially from 2019's fourth-quarter figure of $11.94.
Solid figures, but Buffett, in a letter to investors, revealed that the company had also been engaging in stock buybacks. In fact, the company not only bought back $9 billion in shares during the fourth quarter alone, it had also bought back $25 billion in shares over the course of the year. Additionally, Buffett revealed that the company was planning further buybacks in the future, with an eye toward “enhanc(ing) the intrinsic value per share for continuing shareholders and...leav(ing) Berkshire with more than ample funds for any opportunities or problems it might encounter.
A Quiet Front From Analysts
Normally, here we remark on the overall analyst pool's assessment of a company for the last six months, as based on our latest research. That's actually not possible with Berkshire Hathaway, as there isn't much of an analyst opinion. This is likely due in large part to the fact that Berkshire Hathaway is perhaps the ultimate in diversification efforts; it has a range of subsidiary efforts that engage in industries from freight rail transportation to utility services to even insurance and real estate. Trying to maintain an opinion over such a wide-ranging operation is likely difficult.
The Reach of Multiple Octopi
This is perhaps the point that makes Berkshire Hathaway an attractive buy, especially given its price for Class B shares. Based on current reports, there are two points that separate Class B shares from Class A shares. The first of these is voting rights; Class A shares get more voting rights from current reports. The second issue is share price; Class B shares currently sell at a reasonable $246.97 as of this writing. Class A shares, meanwhile, currently sell at $373,012 per share as of this writing.
There are, admittedly, some points about Berkshire Hathaway's operations that may make little sense outside of the company's own C-suite; for instance, reports noted that Berkshire Hathaway actually owns a larger stake in the Chinese automaker BYD (OTCMKTS:BYDDF) than it does in General Motors (NYSE:GM), one that's in fact almost twice as large. BYD is Berkshire Hathaway's eighth-largest holding, reports note, while General Motors is its 15th-largest.
Additionally, the company is poised to make much smaller investments in the near term; Berkshire Hathaway has a war chest of $138 billion on its side, reports note, and the company's plan to place smaller investments in more places may stem from a deal made back in 2016 for an airplane parts manufacturer called Precision Castparts; Berkshire Hathaway shelled out $37 billion for that deal but ultimately ended up with a $10 billion write-down back in 2020.
One point remains clear, however: Berkshire Hathaway is easily one of the most diversified companies around, if not outright the most. For those looking for a stable investment that isn't likely to bottom out without a complete economic collapse, this may be exactly what you're looking for. While it may be distressing that a company with a 12-figure war chest isn't paying dividends, reports suggest the company has an annualized average five-year rate of return of around 14.7%. That's nothing to sneeze at when bank interest is languishing in the sub-whole-number percentage levels.
With a measured response to the future, and a massive war chest on hand, investing in Berkshire Hathaway might be one of the best moves around. The fact that the company is planning further share buybacks certainly doesn't hurt either; scarcity tends to make things more valuable rather than less. While the massive price tag will keep most out of Class A investing, Class B is fairly attractive, and should be considered as a response to a wildly-fluctuating market and economy.
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