- (0:20) - Whats Going On With Berkshire Hathaway and Warren Buffett?
- (4:00) - Breaking Down Berkshire Hathaway’s Stock Performance
- (24:20) - Episode Roundup: [email protected]
Welcome to Episode #414 of the Value Investor Podcast.
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
She has talked about Berkshire Hathaway, and Warren Buffett, dozens of times on the podcast. And why wouldn’t she? Buffett is the world’s greatest value investor.
But in recent months, Berkshire Hathaway has failed to break out to new all-time highs, even when the S&P 500 has done so. Instead, the shares have pulled back from their all-time highs.
In May 2025, Buffett announced he would step down from being CEO at the end of the year. He will remain on the board.
Coincidence that the shares weakened afterwards, or not?
Berkshire Hathaway Isn’t Cheap
Berkshire Hathaway (BRK.B) has a share repurchase program, but for the last five quarters, Buffett has not bought back any shares.
Why not?
Buffett will only buy the shares if he thinks they are a good value. Berkshire Hathaway is trading with a price-to-book (P/B) ratio of 1.5. A P/B ratio under 3.0 usually designates a company has value.
But Buffett has indicated that he will only buy Berkshire shares when the P/B ratio is at 1.2 or less. Therefore, he’s not buying right now.
If he’s not willing to buy shares, why should you?
Additionally, the price-to-earnings (P/E) ratio is stretched. Earlier this year Berkshire Hathaway traded at 26x. It’s currently trading at 22.9x after the recent weakness in the stock.
A forward P/E under 15 usually indicates value.
Berkshire Hathaway’s Wild Card: It’s Cash Hoard
By now, most of us know that Berkshire Hathaway is sitting on what is nearly its largest cash hoard ever. At the end of the second quarter, it was $344 billion, down from $347 billion at the end of the first quarter, which was the all-time high.
The cash is now 29.6% of the company’s assets. The last time it was above 20%, outside of this cycle, was in 2003-2005.
Last time the cash got high, Buffett went on to buy many distressed assets for cheap prices during the Great Financial Crisis. But this time, assuming there may be some kind of economic downturn which will again unleash some bargains, Buffett will not be the CEO of Berkshire Hathaway. Greg Abel will be.
Are investors on the sidelines because the Buffett premium is gone?
Tune into this week’s podcast to find out.
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Berkshire Hathaway Inc. (BRK.B): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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