I'm going to write about what makes Berkshire a good company, and why I am buying it. Since it is such a huge company I might not be able to define every single detail but I will do my best to cover the most important aspects of the company for you. I hope you enjoy my idea, I am using my time to write this for your benefit and entertainment. If your deciding whether or not you want to buy Berkshire shares maybe this idea can help you to be more informed without having to do a ton of research.
One of the most appealing things to me right now about the shares, is that they are significantly undervalued. The best way to determine the intrinsic value for this company would be to use the discounted cash flow calculation. Projecting 5 years into the future, based on how much money the company will be expected to generate over this period of time, it is reasonable to assume the intrinsic value of the shares to be approximately $560. I think it could take some time to get there so I'm estimating about one or two years from now Berkshire will be worth $560 or more.
Looking at how the company actually uses its capital is important. When the market is at all time highs, investors typically rebalance their portfolios into undervalued, less risky, more stable companies. Berkshire fits the narrative here, and I'm going to explain why.
-Berkshire reallocates capital to its diverse portfolio of businesses, including railroad, energy, manufacturing, and service and retail companies. This can involve funding growth and "bolt-on" acquisitions for subsidiary companies.
-A significant portion of capital is used to purchase equity securities, such as stocks in companies like Apple, American Express, and Coca-Cola, either for a full stake or a "part interest".
-The company holds a large amount of cash and short-term investments to be prepared for market opportunities, which can include waiting for the right time to make large acquisitions or investments.
-Berkshire's core insurance operations generate "float"—money taken in as premiums before claims are paid—which is then invested in other businesses and securities.
-Berkshire uses debt very sparingly and prioritizes equity and its insurance float as its primary sources of capital.
-While individual businesses manage their daily operations, top management, led by Warren Buffett, makes the major capital allocation decisions to ensure capital is deployed where it can generate the highest returns. However as many of you know, Warren Buffett will step down as CEO and leave Greg Abel in charge, I don't think this will change much in the core operations of the business.
All of these factors contribute to this being a low risk, undervalued investment opportunity despite unfavorable market conditions with the US500 being at all time highs. I have rotated some capital in Berkshire class B shares as a way to reduce my risk but also stay exposed to the market. Berkshire is a great defensive stock that can be added to a diversified portfolio to grow and protect it.
One of the most appealing things to me right now about the shares, is that they are significantly undervalued. The best way to determine the intrinsic value for this company would be to use the discounted cash flow calculation. Projecting 5 years into the future, based on how much money the company will be expected to generate over this period of time, it is reasonable to assume the intrinsic value of the shares to be approximately $560. I think it could take some time to get there so I'm estimating about one or two years from now Berkshire will be worth $560 or more.
Looking at how the company actually uses its capital is important. When the market is at all time highs, investors typically rebalance their portfolios into undervalued, less risky, more stable companies. Berkshire fits the narrative here, and I'm going to explain why.
-Berkshire reallocates capital to its diverse portfolio of businesses, including railroad, energy, manufacturing, and service and retail companies. This can involve funding growth and "bolt-on" acquisitions for subsidiary companies.
-A significant portion of capital is used to purchase equity securities, such as stocks in companies like Apple, American Express, and Coca-Cola, either for a full stake or a "part interest".
-The company holds a large amount of cash and short-term investments to be prepared for market opportunities, which can include waiting for the right time to make large acquisitions or investments.
-Berkshire's core insurance operations generate "float"—money taken in as premiums before claims are paid—which is then invested in other businesses and securities.
-Berkshire uses debt very sparingly and prioritizes equity and its insurance float as its primary sources of capital.
-While individual businesses manage their daily operations, top management, led by Warren Buffett, makes the major capital allocation decisions to ensure capital is deployed where it can generate the highest returns. However as many of you know, Warren Buffett will step down as CEO and leave Greg Abel in charge, I don't think this will change much in the core operations of the business.
All of these factors contribute to this being a low risk, undervalued investment opportunity despite unfavorable market conditions with the US500 being at all time highs. I have rotated some capital in Berkshire class B shares as a way to reduce my risk but also stay exposed to the market. Berkshire is a great defensive stock that can be added to a diversified portfolio to grow and protect it.
Note
If I left anything out that makes the company good, or bad, or you enjoyed the read, let me know what your thinking or drop a like!
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.