Cash Hoard Allows Advantageous Investments
Berkshire Hathaway (BRKB) is a complex holding company with renowned value investor Warren Buffett at the helm as chairman and chief executive officer. Berkshire directly owns 100% of 62 businesses. In addition, several insurance companies owned by BRKB hold parts of 52 businesses; these businesses were attained primarily through purchases of marketable common stocks.
Any excess capital within Berkshire’s insurance companies is used to buy stocks. Berkshire’s businesses and stock investments make up a well-diversified array of investments, with a significant over-weighting in the insurance sector.
The 10 largest common stock holdings held by Berkshire’s insurance subsidiaries are: Kraft Heinz (KHC), Wells Fargo (WFC), Apple (AAPL), Coca-Cola (KO), International Business Machines (IBM), American Express (AXP), Phillips 66 (PSX), U.S. Bancorp (USB), Charter Communications (CHTR) and Moody’s (MCO). Stock holdings are managed by a team of investment professionals at Berkshire who use a buy low, hold forever approach.
Mr. Marc D. Hamburg, 67, is chief financial officer and senior vice president at Berkshire. Mr. Hamburg has served in both capacities for more than 25 years.
BRKB shares will likely rise faster than the S&P 500 Index during the next 12 months, because of the heavy weighting in financial assets which will benefit from higher interest rates. In addition, the income tax rate for Berkshire is 30%, which could drop noticeably if tax reform is enacted.
At 1.38 times conservatively stated book value, BRKB shares are undervalued. The company has built up a cash hoard of $79 billion, which provides flexibility to take advantage of investment opportunities quickly. Buy.