The Magnificent 7 Have a New Trillion Dollar Rival

Berkshire Hathaway (NYSE:BRK.B) is arguably one of the most successful companies in American history. The conglomerate founded by Warren Buffett now owns stakes in both large public companies and several wholly-owned subsidiaries.

Berkshire itself has also been a remarkable investment vehicle for its shareholders, boasting a 30-year total return of over 3,000%.

Over many years, Buffett and his associates have built Berkshire through shrewd stock picking, acquisitions and a disciplined yet opportunistic approach to investing.

Just how much has this lifetime of Buffett’s work made Berkshire worth, and does the stock still look like a good choice for the future?

Key Points

• Valued close to $1 trillion, Berkshire remains strong through traditional business lines and an exceptional insurance segment.
• Berkshire’s $277 billion in cash provides stability and allows opportunistic investments during market downturns.
• With meaningful upside estimated, Berkshire offers long-term value, making it a solid buy at a fair price.

How Much Is Berkshire Hathaway Worth?

Berkshire’s Hathaway’s market capitalization surpassed $1 trillion recently.

In late August, Berkshire Hathaway became one of fewer than ten American companies with market capitalizations of over $1 trillion.

Crucially, Berkshire is the only company in that group that isn’t a technology firm. While the likes of Microsoft, Apple and NVIDIA tend to trade at high value multiples due to their growth potential and high profit margins, Berkshire has been able to cross the 12-figure threshold as a company operating in much more traditional business lines.

Since August, Berkshire’s worth has backed off very slightly, causing it to fall below the $1 trillion mark again. At the time of this writing, the company’s market cap was $988 billion. This kind of volatility, however, is far from unusual and doesn’t inherently represent the market turning back on Berkshire’s valuation.

Is Berkshire Actually Worth More Than $1 Trillion?

While Berkshire is currently valued at close to $1 trillion by the market, there are some signs that the company is actually worth more.

First and foremost among these is the ongoing share repurchase activity that the company has become known for over the past several years.

In total, Berkshire Hathaway has bought back over 10% of its shares, continuing to buy even as prices have drifted steadily higher.

Even in Q2, which saw the slowest rate of buybacks from Berkshire since the company began its repurchase campaign five years ago, the company bought back about $345 million in its own shares.

Though the slower rate of buybacks may indicate that Berkshire’s stock is trading closer to its intrinsic value as determined by Buffett than it was in the past, the fact that Berkshire is still repurchasing stock seems to suggest the company may still be undervalued.

Will Berkshire Shares Keep Rising?

In the short term, analysts expect to see BRK.B shares advance to an average 12-month target price of about $507.75. This would give the stock an upside of roughly 11.8% from the most recent price. This is far below the 36% gain the stock has seen over the last 12 months, but still enough to make it appealing to investors.

Looking further down the road, it’s entirely possible that Berkshire will continue its decades-long compounding for many more years to come.

The company is currently sitting on a cash reserve of about $277 billion, a number that has grown steadily throughout 2024 as Berkshire has trimmed its stake in major holdings like Apple.

For the time being, this cash is invested in US Treasury instruments that are generating Berkshire a healthy and largely risk-free return.

The real power of this cash, though, is in Berkshire’s ability to deploy it whenever a major investment opportunity becomes attractive. Though Buffett has had trouble finding good values in today’s highly-priced market, Berkshire retains the ability to make massive investments when volatility presents undervalued businesses. This has been the basis for the company’s success up to this point, and it’s very probable that Berkshire will be able to make such investments again in the future.

Beyond its investing capacity, Berkshire is also continuing to see success in the insurance business that provides its float capital.

In Q2, the company reported a 3.7% increase in written premiums and a 10% increase in earned premiums, both of which showed the strength of the company’s insurance and reinsurance businesses.

With a stable of excellent wholly-owned businesses, a strong insurance business and a massive store of cash ready to deploy whenever stock prices become attractive again, there is little reason to doubt that Berkshire can continue to increase its value in the long run.

While only time will tell how high the company’s shares will eventually go, it appears that Berkshire still has a significant amount of fuel left in its growth engine.

Is Berkshire a Good Buy Now?

Even with all of the positives mentioned above, investors may wonder whether buying Berkshire is a good choice at the moment. Slowing share buybacks could mean that there’s less value in Berkshire shares, and Buffett is clearly pulling back to cash in light of his difficulties finding new investment opportunities. The value investing legend at the head of the company is also 94 years old. Though he has made a strong succession plan, his eventual departure from the company could rob it of the value investing acumen that allowed it to become as successful as it now is.

Berkshire’s pullback to cash, though, is unlikely to be a long-term concern, as Buffett appears to be reacting to an overvalued market with the potential to fall significantly. The Oracle of Omaha’s well-known favorite total market value indicator is the ratio between total market capitalization and GDP. This ratio currently stands at over 200%, far above its historical level. With stocks seeming deeply overvalued, Buffett’s decision to sell may actually benefit Berkshire in the long run. Cash gained from selling today could be used to purchase stocks at more attractive prices when an eventual correction takes place.

All told, Berkshire Hathaway still looks like a good buy at current prices. Even if the stock isn’t actively undervalued, there appears to be very little chance of overvaluation. As such, those who buy Berkshire today may be getting what Buffett himself would call a great company at a fair price.