BRK.B
📉 Warren Buffett’s announced departure and concerns over future growth potential have led to a cautious outlook on Berkshire Hathaway, despite its solid foundation.
📊 Valuation metrics, such as trading above 1.69x book value and a Price-to-Earnings ratio of 24x, suggest the stock is currently overvalued compared to historical levels and Buffett’s own buyback thresholds.
💡 The video creator suggests that while Berkshire is a low-risk company, better investment opportunities with higher expected returns currently exist in other companies like Meta, Alphabet, or Microsoft.
@InvertirdesdeCero:
“In the last week, many of you have written to me asking what to do with your Berkshire shares, or if the drop of more than 6% after the announcement of Buffett’s succession represents an investment opportunity. The first thing I want to make clear is that Buffett’s succession does not imply a drastic change in the way the company is managed. Greg Abel, who will take over as CEO on January 1, 2026, has been working side-by-side with Buffett for many years and fully shares his philosophy of prudence, long-term focus, and decentralized management. In fact, Buffett has made it clear that Abel has the same vision for the company as he does; so, in operational terms, we shouldn’t expect a revolution or drastic changes. Now, that doesn’t mean some things won’t change, specifically the stock investment part, which has historically been under the direct command of Buffett and Munger, and this could be managed differently. We don’t know if Greg Abel will make decisions himself or delegate aggressively to current managers Ted Weschler and Todd Combs. And most importantly, we don’t know if future performance will be comparable to that of recent decades, something that is very difficult. Furthermore, in my opinion, Berkshire’s business no longer has as much growth potential as it used to. Buffett himself acknowledged years ago that Berkshire was so large that it was very difficult to find opportunities significant enough to move the needle on results. He even said that investors might feel somewhat disappointed with the company’s future growth, precisely for that reason. And if we add to that the analysis of its current valuation, we must be very prudent. Historically, Buffett stated that a multiple of 1.2 times the company’s book value was a fair multiple, or valuation, to repurchase Berkshire shares. However, as you can see in this graph, today Berkshire trades above 1.69 times book value, well above the 1.2 times level. The same occurs if we look at the PER ratio. With a multiple of 24 times normalized earnings for the next 12 months, this metric is also above its historical average and near the highs of the last decade. Probably, we are looking at a solid, well-managed, and low-risk investment, but not necessarily attractive in terms of expected return. And if we consider the opportunity cost today, there are businesses like Meta, Alphabet, or Microsoft with much more tailwind than Berkshire, better or equal competitive advantages, good fundamentals, and better expected returns if they are bought at the right price. Therefore, and being totally honest with you, I would not invest in Berkshire Hathaway today, not because I doubt its future, far from it, but because I believe there are other better alternatives to position oneself in this market moment.”
Watch the exact part of the video where InvertirdesdeCero talks about Berkshire Hathaway here:
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