Investing is tough enough in normal times. When volatility spikes, inflation is high, and the economic future looks incredibly uncertain, investing becomes substantially more difficult for most of us mere mortals. In times like these, looking to Warren Buffett — easily among the greatest of all living investors — for inspiration can be a great way to keep investing despite those challenges.
Buffett built his fortune over decades by buying companies that generate cash — lots of cash. Buffett’s picks are not typically the fastest-growing businesses out there, but their ability to generally make money in good times and in bad make them worthy of consideration in times like these. With that in mind, there is one Warren Buffett stock that stands out as my absolute top to consider buying right now: Berkshire Hathaway (NYSE: BRK.A)(NYSE:BRK.B),
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What’s so special about Berkshire Hathaway?
Alone among Buffett’s stock picks, Berkshire Hathaway is the one that can count him as an employee. As CEO of the company, Buffett both directs the operations of the business and the investment of all that cash it throws off. And that makes it the hub of all Buffett-related investing activities.
With an investment in Berkshire Hathaway, you get the only Buffett pick that also gives you access to the insurance businesses that the company controls, as well as the legion of subsidiaries it owns. Your ownership stake gets you all that, plus the benefits that come from having Buffett and his designated successors controlling the investment of the excess cash those businesses generate.
You’re not just getting access to Buffett’s investments by buying shares of Berkshire Hathaway, you’re also getting them at a remarkably low cost. The company trades at just around 1.2 times its book value. In essence, that basically means that if you wanted to assemble the company yourself from its component parts, it’d cost you almost as much, and you wouldn’t get Buffett as part of that deal.
That combination of factors adds up to make Berkshire Hathaway my top Warren Buffett stock to consider buying now.
Is there a downside?
All that said, there is some risk associated with owning Berkshire Hathaway. First and foremost, the company is practically synonymous with Buffett, as he has led the company for over half a century. Buffett is over 90 years old, so his tenure as Berkshire Hathaway’s leader is closer to the end of its term than the beginning of it. There is a risk that when Buffett eventually does step down or pass away, Berkshire Hathaway’s stock could fall in fear of the unknown.
In addition, unlike many of Buffett’s investment picks, Berkshire Hathaway does not pay a dividend. As a result, the only way for shareholders to tangibly benefit from any rewards they might see from being owners is to be willing to sell at least part of their stakes. That’s a little odd for a company that’s known for being defensive and cash rich — and not among the fastest growing ones in the marketplace.
All told, it’s a great company, despite those downsides
When all is said and done, no investment is perfect, not even Berkshire Hathaway. As a result, although it is my top Warren Buffett stock to consider buying right now, it’s one that best fits within an overall intelligent asset allocation strategy. By owning it as part of that overall strategy, you can give yourself your best chance of balancing the risks and rewards of being a shareholder within the context of your overall portfolio.
Of course, a smart overall allocation strategy is one that takes time to get in place. So get started now, and get yourself in a spot where you can own a piece of this tremendous Buffett company with him at the helm.
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Chuck Saletta has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway (B shares). The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.