Could Buying Berkshire Hathaway Today Set You Up for Life?

Shares of Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) have gotten caught up in the market sell-off. That's not at all shocking, but the really important fact is that Berkshire Hathaway's decline from its 52-week high is about half of the fall the S&P 500 index (SNPINDEX: ^GSPC) has experienced. There's a reason for the better showing, and it all stems from Warren Buffett and his investment team. Here's why buying Berkshire Hathaway could set you up for life, but only if you buy it for the right reason.

Berkshire Hathaway's big cash out

Berkshire Hathaway has a large insurance business, so it is usually classified as a financial stock. However, it is really a highly diversified conglomerate. There are 189 companies under the Berkshire Hathaway umbrella, and they span from insurance to chemicals, with a massive amount in between. The company's business description in its annual report runs a huge 23 pages. Most companies only need a paragraph or two to describe their businesses.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Image source: Getty Images.

The real story here is that Berkshire Hathaway isn't your typical company. It is, in reality, the investment vehicle of its CEO, Warren Buffett. To understand why the company he runs has been performing better than the market, you need to understand what Buffett has been doing. On that score, Buffett and his investment team were raising cash throughout 2024 by selling stocks, nearly doubling the cash and short-term investments the company owned.

BRK.A Cash and Short Term Investments (Quarterly) data by YCharts

The extra cash on the balance sheet is likely, and correctly, being viewed as a vital offset for the company from the risk being posed by the current market downturn. The real benefit of that cash, however, is likely to be longer-term in nature.

What you are buying when you buy Berkshire Hathaway

The move Buffett and his team made into cash is an important signal. This isn't your typical company. When you buy Berkshire Hathaway, you are, in effect, giving Warren Buffett and his team your money so they can invest it for you. In this way, Berkshire Hathaway is kind of like a mutual fund. And a very rare one, performance-wise, because it has so consistently outperformed the S&P 500 index over time.

BRK.A Total Return Level data by YCharts

That said, the fact that Berkshire Hathaway's cash position rose dramatically in 2024 is probably more luck than anything else. Buffett isn't a market timer, and the company has to move slowly when selling stocks because of the massive size of its holdings. So, it probably isn't appropriate to imbue Buffett and his team with any special abilities in regard to selling out prior to what appears to have been the market top.

The real benefit of this cash is in what Buffett and his team can do with it now that stock prices are coming down. Buffett normally tries to buy good companies when they are attractively priced. He then holds for the long term, benefiting from the growth of the business over time. It is hard to find attractively priced companies when the markets are frothy, a fact Buffett alluded to in his 2023 note to shareholders.

With prices coming down in the stock market, though, it could soon be time for an acquisition or two. Given Berkshire Hathaway's massive size (it has a roughly $1 trillion market cap), small deals won't move the needle. So, look for something big and newsworthy. That transaction is where Buffett and his team are going to be adding the most value for shareholders.

It's always the right time to hire a good money manager

There are clearly better times and worse times to buy shares of Berkshire Hathaway stock. But there's really never a bad time to hire a good money manager, which is what Buffett is if you step back and look at Berkshire Hathaway as more than just a company. And if history is any guide, the giant conglomerate could set you up for a lifetime of strong investment decisions if you buy it today. Indeed, it might make sense to buy Berkshire Hathaway while investors are busy running for the hills because of the market downturn. This dislocation is what will likely set Buffett and his team up for their next big acquisition.

Should you invest $1,000 in Berkshire Hathaway right now?

Before you buy stock in Berkshire Hathaway, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Berkshire Hathaway wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $590,231!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 5, 2025

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.