Warren Buffett is as famous, and probably as successful, as any investor in U.S. history – from J.P. Morgan to Joseph Kennedy to George Soros.
Buffett’s Berkshire Hathaway (BRK.B) conglomerate says it registered a compound annual return of 19.8% from its 1965 inception to 2023.
Such a performance is simply astounding. It’s almost double the 10.2% for the S&P 500 during that period, including dividends. The company’s annual shareholders meeting begins Saturday.
The 93-year-old Oracle of Omaha, as Buffett is affectionately known, started his investing career by looking for “cigarette butts.” That’s fair companies trading at a great price. But then his late partner Charlie Munger convinced him to seek great companies at a fair price instead.
Perhaps Buffett’s most successful investment is auto insurer Geico. Buffett made his first purchase of the discount insurers' shares in 1951 as a Columbia University business student. Berkshire gained full ownership of Geico in 1995.
Other famous companies owned by Berkshire include BNSF (Burlington Northern Santa Fe) Railway, See’s Candies, and Dairy Queen.
While you can't buy big companies like Buffett does, you can buy shares in Berkshire Hathaway. One analyst thinks it could be wise to do that now.
Image source: Paul Morigi/Getty Images for Fortune/Time Inc
Buffett and Berkshire are cash magnets
Berkshire’s insurance companies provide a steady stream of cash through premiums. That gives Buffett the firepower to buy stakes in other companies as it did with Apple or the corporations outright as it did with BNSF.
At the end of last year, Berkshire's cash reserves were $168 billion, giving it plenty of dry powder to do deals.
However, the company is judicious with its horde, even when buying back Berkshire Hathaway's stock. He only buys Berkshire Hathaway when Buffett considers shares cheap. Berkshire snatched 3,808 Class A shares this year through March 6, paying about $2.2 billion to $2.4 billion.
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Buffett, one of the world's wealthiest people, is well-known for Berkshire’s stock holdings, which totaled about $869 billion as of Dec. 31. That makes it one of the biggest equity managers in the world.
Its biggest holdings exiting last year were cellphone/computer legend Apple (AAPL) , followed by Bank of America (BAC) , credit-card luminary American Express (AXP) , beverage icon Coca-Cola (KO) , and oil stalwart Chevron (CVX) .
Buffett’s investment philosophy is to hold shares as long as fundamentals dictate.
Given his success, thousands, probably millions, of investors and analysts are enamored with and influenced by Buffett. His folksy demeanor has made him basically the financial advisor for the entire country.
Expert words of praise for Buffett and Berkshire
One analyst lauding Warren Buffett and Berkshire Hathaway is Greggory Warren of Morningstar, a pre-eminent investment research firm for individual investors.
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“Berkshire, owing to its diversification and its lower overall risk profile, offers one of the better risk-adjusted return profiles in the financial services sector,” he wrote in a commentary.
“And it remains a generally solid candidate for downside protection during market selloffs. We remain impressed by Berkshire's ability in most years to generate high-single- to double-digit growth in book value per share, comfortably above our estimate of its cost of capital.”
The future looks bright, Warren says. “It will take some time before the firm finally succumbs to the impediments created by the sheer size and scale of its operations,” he opined.
“And the departures of Buffett and Munger will have less of an impact on future operating results than many investors believe.”
Warren said Berkshire has broad fundamental strength. “Its decentralized business model, broad business diversification, high cash-generation capabilities, and unmatched balance sheet strength [act] as true differentiators for the firm.”
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Meanwhile, Catherine Seifert, an analyst at CFRA, says now is a good time to buy Berkshire stock. It’s “undervalued versus historical averages,” she wrote in a commentary.
“We expect improved claim trends at Geico and strong reinsurance results will provide the shares with a catalyst for continued outperformance.”
Her 12-month target price for B shares is $472, compared to Friday’s quote of $402. The estimate assumes shares will trade at 22.6 times her 2025 operating earnings estimate.
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The author owns shares of Berkshire Hathaway.
