Berkshire Hathaway: Buy, Sell, or Hold?

Warren Buffett, the famed investor and one of the world's wealthiest individuals, built his fortune primarily through his holding company, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B). Today, Berkshire Hathaway is worth nearly $1 trillion; its success is the culmination of a buy-and-hold strategy for numerous private businesses and stakes in public corporations.

Owning Berkshire Hathaway stock is as close as you can get to investing alongside Buffett.

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But valuations factor into every investment. Buffett, a notorious stickler for value, would probably tell you there's no such thing as a stock you should buy at any price. It's essential when deciding whether to buy, sell, or hold Berkshire Hathaway stock today.

So, which is it? Here is what you need to know.

One thing is sure: Berkshire Hathaway creates shareholder value

The inner workings of Berkshire Hathaway or any other holding company can seem like murky waters. There are so many moving parts that your head might spin. But if you think about it, a holding company is a business that owns other businesses.

Berkshire Hathaway owns dozens of private businesses, including railroads, GEICO insurance, Dairy Queen, See's Candies, and more. They operate independently, and their profits go to Berkshire (parent company). If Berkshire Hathaway's stakes in public companies happen to pay dividends, they go to Berkshire's balance sheet in the same way. Some of Berkshire Hathaway's notable investments include stakes in Apple, Bank of America, American Express, and Coca-Cola.

In a way, we, as investors, are all our own holding companies.

There, Buffett and the rest of Berkshire Hathaway's management team decide how to use the money to create value for the company's shareholders. This could involve acquiring or investing in companies, repurchasing Berkshire Hathaway stock, or doing something else.

The Berkshire Hathaway team has created immense value for its shareholders. You can see this reflected in the company's book value over the years below:

BRK.B Book Value (Per Share) data by YCharts

Ultimately, this graph explains why Buffett and the rest of Berkshire Hathaway's long-term shareholders have done so well. It doesn't guarantee Berkshire Hathaway's future success, but it should give investors confidence in its ability to operate through economic ups and downs and a changing world.

Here is the concern with Berkshire Hathaway stock today

What's the problem, then? You might guess Buffett's age. Sure, he's in his 90s, something worth considering if you're thinking decades into the future. But that's been thought of already. Buffett's successor has spent years at the company and probably deserves the benefit of the doubt, especially given how financially equipped Berkshire Hathaway is. The company is currently sitting on roughly $325 billion in cash, a financial armory ready for the right opportunities.

My concern boils down to arguably Buffett's chief investing principle: value.

Using book value, the same metric we measure Berkshire's growth by, the stock is near its highest valuation in a decade:

BRK.B Price to Book Value data by YCharts

Not to lean too heavily on what someone else does (or doesn't do), but Berkshire Hathaway didn't repurchase any of its class A or B shares in the third quarter of 2024. Perhaps that will change when the company reports fourth-quarter results, but it doesn't look like Buffett and Co. see much value at these prices. On the other hand, Berkshire Hathaway has primarily sold stocks to increase its cash holdings over the past few quarters.

Buy, sell, or hold?

You might have seen this coming, but it's hard to call Berkshire Hathaway a buy today. Buffett's reluctance to repurchase its stock is noteworthy, but its high valuation relative to historical norms is enough to hold off. However, Berkshire Hathaway is a clear winner and an excellent stock to buy and hold in a diversified portfolio. You don't part with such stocks easily, so investors should think twice before selling if they already own it.

If Berkshire Hathaway's valuation reverts toward its historical averages or the company makes a blockbuster acquisition with its cash, the stock may charge right back into buy territory. For now, sit tight and wait things out.

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American Express is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Justin Pope has positions in Coca-Cola. The Motley Fool has positions in and recommends Apple, Bank of America, and Berkshire Hathaway. The Motley Fool has a disclosure policy.