It’s not really common to find a quality business for sale, especially one featuring the track record and qualities of Berkshire Hathaway (BRK.B), which is still sitting roughly 9% below its 52-week high even as the broader market has advanced higher.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
The somewhat lackluster performance appears to stem from investors grappling with two factors simultaneously. You have Warren Buffett’s impending retirement, alongside some softer spots in recent results. And yet, underneath the headlines sits a company with an exceptional, balanced portfolio that can compound from here, while the valuation still looks… well, sane. All in all, in my view, this is the time to stay patient and Bullish on BRK stock.
Why BRK.B Stock Has Stumbled
Back in May, Buffett announced he’ll step down as CEO by year-end, with Greg Abel set to take the helm. The announcement clipped sentiment and left the stock lagging the market over the summer, which, if we’re being honest, is understandable when the face of the franchise changes. Still, it’s sad to see shares have failed to approach their pre-announcement levels, which also happened to coincide with their 52-week high.
Moreover, the company’s most recent results were somewhat soft. Berkshire recorded an “other-than-temporary” impairment on its Kraft Heinz stake ($5.0 billion pre-tax, or $3.76 billion after tax), its second impairment on KHC following a ~$3 billion charge in 2019. The very acknowledgment that the value gap had become persistent was certainly not a pretty sight. Operating revenue also slipped to about $92.5 billion in Q2, down ~1.2% year over year, and insurance underwriting profit fell nearly 12% (to $1.99 billion from $2.26 billion).
There were other issues too, as operating income dipped ~3.8% to $11.16 billion, and Berkshire again refrained from buybacks, which is fine from a discipline standpoint. Still, it removes a mechanical support under the share price. The lack of significant new acquisitions by public companies, which could utilize their large cash reserves, is also likely a reason for the failure to generate bullish enthusiasm.
Quiet Strength, Strategic Moves, and a $340 Billion War Chest
Despite these headwinds, the story has brightened over the last three months. A few days ago, Berkshire agreed to acquire OxyChem from Occidental (OXY) for $9.7 billion in cash. It may not be the blockbuster acquisition investors were expecting, but Berkshire still managed to secure a durable, cash-generating industrial asset that fits perfectly into its long-term playbook. It won’t move the needle alone (few things do at this size), but it’s a strategic bolt-on that adds high-quality earnings to the private portfolio.
Moreover, the private operating businesses are doing very well. In Q2, BNSF and Berkshire Hathaway Energy both posted year-over-year profit gains, with BNSF at $1.47 billion versus $1.23 billion and BHE at $702 million versus $655 million. I believe that the subtle compounding effects are often overlooked when a single impairment is emphasized. Meanwhile, insurance “float” edged up to ~$174 billion, and even with underwriting profit softening, investment income remained robust thanks to its hefty Treasury holdings.
Speaking of Treasury holdings, at the end of June, Berkshire held roughly $339.8 billion in cash and T-bills, making it the largest private holder of U.S. Treasury bills. The stash both throws off meaningful income and preserves enormous optionality if markets hiccup. I think that this optionality alone should rally investor enthusiasm in a bear market. In the meantime, on the public-stock side, the portfolio still skews quality, including names like American Express (AXP), Bank of America (BAC), and Coca-Cola (KO), even after trimming Apple (AAPL) last year.
A Fair Price for Quality and Optionality in a Volatile Market
Now, here’s where the “buy the dip” case gets practical. I estimate that book value per B share stands at about $310 today. With BRK priced at around $491, you’re paying roughly 1.6x book value. That may sound like a noteworthy premium, but for a firm whose private businesses are grinding earnings higher and that sits on ~$340 billion of dry powder, I don’t think that’s a stretch valuation. It offers a margin of safety with upside optionality if volatility returns and deals become cheaper.
Could earnings waver if short-term rates fall and T-bill income steps down? Sure. But the flip side is that lower rates typically reignite animal spirits in M&A and credit, exactly where Berkshire’s liquidity shines. With a resilient insurance complex, improving rails and utilities, and a freshly augmented industrial footprint (OxyChem), I see a setup where book value can continue compounding, and today’s multiple is well-positioned.
Is Berkshire Hathaway Stock a Buy, Hold, or Sell?
There are just 2 analysts offering price targets on BRK.B stock via TipRanks, with a fairly bullish consensus. Specifically, one analyst has rated the stock a Buy and one a Hold. At $536, Berkshire’s average stock price target implies almost 10% upside over the next twelve months.
Strong Fundamentals Make This Dip a Buying Opportunity
Berkshire has pulled back from its highs following headline noise around Buffett’s exit and a softer quarter marked by Kraft Heinz and weaker underwriting results. Yet beneath the surface, its private businesses and public holdings remain solid, backed by one of the strongest balance sheets in corporate America. At current levels, the stock looks reasonably priced for its quality, resilience, and future deal-making firepower — making this dip, in my view, one worth buying.