Should You Forget Berkshire Hathaway and Buy a Focused Financial Stock Instead?
Key Points
Berkshire Hathaway has underperformed the market over the past three years.
JPMorgan Chase pays a dividend, while Berkshire Hathaway doesn't.
JPMorgan Chase is better positioned to provide higher total returns over the foreseeable future.
- 10 stocks we like better than JPMorgan Chase ›
Over the years, Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) has grown into one of the world's largest companies, with a valuation of over $1 trillion as of Aug. 12. Historically, Berkshire has been a reliable outperformer, but over the past few years, that hasn't been the case. It's up 42.6% over the past three years compared to the S&P 500's 73.6% return.
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With Berkshire embracing a new, post-Warren Buffett era, should investors embrace the company even though it's underperforming, or focus on a pure financial stock instead? Right now, it's likely the latter, with JPMorgan Chase (NYSE: JPM) as the option to consider.
JPMorgan Chase is the most valuable bank in the world and is the largest American bank by total assets. One key reason why I'd choose JPMorgan Chase over Berkshire right now is its dividend. Berkshire is notable for never paying a dividend, and although that could eventually change under new CEO Greg Abel, I wouldn't hold my breath.
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Right now, JPMorgan Chase's dividend yield is 1.6%, which isn't eye-popping, but it's still higher than the 1% payout you'd get from an S&P 500 ETF. JPMorgan's dividend yield has averaged 2.4% over the past five years, but it's currently on the lower end because of how well its stock has performed over that period, up 128% (as of Aug. 12).
I believe JPMorgan Chase is better positioned to provide greater total returns than Berkshire right now, which is why it would be my go-to.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and JPMorgan Chase. The Motley Fool has a disclosure policy.
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