Berkshire Hathaway Stock Trades at a Premium to Industry: How to Play

Shares of Berkshire Hathaway Inc. BRK.B are overvalued compared with its industry. The stock is currently trading at a price-to-book multiple of 1.48, higher than the industry average of 1.41 but below the median of 1.57.  

It has a Value Score of C. Berkshire is relatively cheap compared to The Progressive Corporation PGR, but expensive compared to Chubb Limited CB.

Berkshire Hathaway is a conglomerate with more than 90 subsidiaries engaged in diverse business activities. This provides it stability in various economic cycles.

BRK.B stock has gained 0.9% in the past year versus the industry’s decrease of 0.2%. The sector and the Zacks S&P 500 composite have gained 11.6% and 17.6%, respectively, in the same time frame.  

Based on short-term price targets offered by four analysts, the Zacks average price target is $537.75 per share. The average suggests a potential 11% upside from the last closing price.

BRK.B’s peer, Chubb, has gained 8.9% in a year, while another peer, PGR, has lost 16.5% in the same time frame.

The Case for BRK.B Stock

Berkshire Hathaway’s insurance operations are at the heart of its business model, contributing roughly one-quarter of total revenues and acting as a key driver of long-term value creation. The segment’s edge comes from disciplined underwriting, broad market reach, and the ability to stay profitable through economic cycles. One of its most important strengths is the large underwriting float it generates, which Warren Buffett has consistently used as a low-cost funding source for investments across the broader company.

This insurance foundation is supported by Berkshire’s other major operating businesses. Berkshire Hathaway Energy (BHE), its regulated utility arm, provides steady and predictable cash flows while continuing to expand its renewable energy investments. These efforts are well aligned with long-term global themes such as electrification, decarbonization and sustainability.

Within this group, Burlington Northern Santa Fe (BNSF) remains a strategically valuable asset as one of the largest freight rail networks in the United States. While BNSF is currently dealing with headwinds from an unfavorable freight mix and lower fuel surcharge revenues, it continues to be a high-quality, long-duration business backed by essential freight demand and the enduring importance of U.S. transportation infrastructure.

Berkshire’s Manufacturing, Service, and Retail operations add another dimension of diversification and growth potential. This segment is more cyclical, but it could benefit significantly from stronger economic activity and improved consumer demand, which may support higher volumes and margin expansion over time.

Financially, Berkshire maintains one of the most conservative capital allocation strategies among large corporations. The company holds more than $100 billion in cash and cash equivalents, with close to 90% invested in short-term U.S. Treasuries and other government-backed securities. This strong balance sheet positions the company to move quickly on acquisition opportunities while continuing to generate reliable income.

At the same time, Berkshire has been actively reshaping its equity portfolio. It exited its BYD stake, trimmed positions in Apple and Bank of America, and increased exposure to Japanese trading houses such as Mitsubishi and Mitsui. It initiated an investment in Alphabet, signaling continued confidence in durable, innovative businesses with strong cash-flow generation. These moves reflect Berkshire’s emphasis on stability, long-term value creation, and shareholder returns through reinvestment and share repurchases. New CEO, Greg Abel intends to fully divest Berkshire’s stake in Kraft Heinz. Notably, in the second quarter of 2025, Berkshire wrote down $3.76 billion against its Kraft Heinz stake, following the latter’s announcement that it was evaluating potential strategic transactions on May 20, 2025. 

Berkshire’s expanding insurance float continues to provide a powerful source of low-cost capital, reinforcing its financial strength and enhancing its ability to compound shareholder value over time.

Berkshire Hathaway’s Return on Capital

Return on equity (“ROE”) in the trailing 12 months was 7.3%, underperforming the industry average of 8%. Return on equity, a key profitability measure, reflects how effectively a company utilizes its shareholders’ funds. It is noteworthy that though BRK.B’s ROE lags the industry average, the metric has been improving consistently.

The same holds true for return on invested capital (ROIC), which has increased every year since 2020. This reflects BRK.B’s efficiency in utilizing funds to generate income. However, ROIC in the trailing 12 months was 5.9%, lower than the industry average of 6.2%.

Analyst Sentiment on BRK.B

The Zacks Consensus Estimate for 2026 revenues indicates a 6% year-over-year increase, but the same for earnings implies a 2.5% year-over-year decrease. BRK.B has a Growth Score of F.

The consensus estimate for 2026 earnings has moved 22.6% north in the past seven days. However, the same for CB and PGR witnessed no movement in the past seven days.

Parting Thoughts on BRK.B Shares

Berkshire Hathaway has been a cornerstone of investor portfolios for decades, generating steady shareholder value under Warren Buffett’s nearly 60-year leadership. The spotlight now shifts to the next chapter, with Greg Abel as CEO, while Buffett remains executive chairman. 

Still, some factors warrant caution. With the stock trading at a premium, returns on capital appear moderate and near-term earnings pressure persists. The company has a VGM Score of C. It is better to stay away from this Zacks Rank #4 (Sell) stock presently.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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