An Investment Puzzle: The Enticing World of Berkshire Hathaway Stocks

Berkshire Hathaway is among the largest companies worldwide and offers two categories of shares that have their own appeal: Class A and Class B shares. While the original Class A shares have existed since Berkshire's initial public offering and are now traded at prices exceeding half a million dollars per share, the Class B shares were introduced in the 1990s to be more accessible to smaller investors. However, with the possibility of fractional shares, even the Class A shares are now reachable by more investors. A question many ask is whether investing in Class A shares is sensible as long as their price is below $700,000. Interestingly, the share price alone is not a decisive criterion for a company's value. A company can have high share prices yet a low market valuation. A common metric to assess Berkshire is the price-to-tangible book value (P/TBV) ratio, which measures market capital in relation to net assets. Berkshire owns one of the largest insurance companies in the U.S., Geico, and numerous other cross-industry holdings. The P/TBV valuation of Berkshire is rising, yet it still remains below the average value since the start of the 21st century. Even when considering the price-to-earnings ratio (P/E), Berkshire appears attractively priced and is close to the values of the last decade between 2010 and 2020. A look at Berkshire's impressive portfolio reveals the extent of the moat built by Buffett. Berkshire owns the third-largest auto insurance company in the U.S., one of the largest railroad companies in North America, significant mortgage and manufacturing firms, as well as numerous energy assets. With over $271 billion in cash reserves, Berkshire is well-positioned to expand its more than $300 billion-stock portfolio or repurchase its own shares. Berkshire's success story is unparalleled: Between 1965 and 2023, Berkshire achieved over 4,300,000% in total returns, a performance far exceeding the 31,200% of the S&P 500, including dividends. The company is backed by a solid succession plan developed by Buffett and the recently deceased Charlie Munger to remain strong in the future. The question of whether to invest in Berkshire Class A shares while they are trading for under $700,000 remains intriguing. Despite Buffett's advanced age, the company has a strong team of investment professionals who offer a long-term perspective. It could be one of those stocks that you simply buy and hold forever.