There are currently 10 companies in the world with a market value exceeding US$1 trillion. It's reasonable to assume that none of these businesses have cheap inventory. These companies are well-known, and their valuations prove that much of the market already believes in their prospects.
But there's one company on the list of the largest publicly traded stocks that screams of a deal. This particular company's valuation just fell to less than $1 trillion. Patient investors seeking not only growth but also protection during market volatility should take a closer look.
With a market capitalization of approximately $990 billion, most investors are already very familiar with Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B). But there are a few things that set it apart from nearly every other large-cap stock.
While their business lines may be somewhat diversified, nearly every other company worth nearly a trillion dollars or more is focused on a specific area. apple Focus on technology. Saudi Arabian Oil Co. is focused on fossil fuels. Tesla Focus on electric vehicles. At the same time, Berkshire is not dependent on any one sector or industry for growth. This is due to its unique business model that no other multi-trillion dollar enterprise can match.
The core of Berkshire's empire is a series of insurance companies. These businesses do generate underwriting profits, but more importantly, they generate what CEO Warren Buffett calls "float." Liquid capital is essentially interest-free capital. When an insurance company writes a policy, it collects a check for the premium. Insurers eventually pay the majority of the premium when a claim is made, but this process typically doesn't happen for months or even years after the policy is in effect. At the same time, the insurance company can retain and invest the premiums, making money on this interest-free capital.
Buffett used the money to invest in other businesses - from technology and energy to transportation and consumer goods. Over time, these investments have grown to huge levels. Today, much of Berkshire Hathaway's value derives not from its core insurance business but from its vast portfolio of wholly owned and publicly traded securities. You'll recognize many of Berkshire's positions. But most are businesses you've never heard of, in industries you could barely imagine, like drywall manufacturing and Latin American banks.
Clearly, Berkshire Hathaway is different from its multi-trillion dollar peers. That's exactly what makes it cheap in today's market environment.
No one can predict where the stock market will go next. While the list of the largest public companies is currently dominated by tech giants, particularly those involved in artificial intelligence and cloud computing, there's no guarantee these stocks will be winners in 2025. These businesses may perform well, although stock prices are based on expectations vs. reality. Currently, certain sectors, such as technology, are rising amid heightened expectations. But as past market cycles have proven, what goes up can easily come down, or at least lag behind the overall market in any given year, if not years.
With Berkshire Hathaway, you don't need to consider this industry-specific risk because the conglomerate is diversified across industries and geographies. Buying Berkshire stock is almost akin to buying a diversified stock market index fund. But instead of a fund that passively tracks an index, you get Warren Buffett, one of the most active investors in history.
To be sure, Berkshire's stock doesn't look cheap based on many traditional valuation metrics. For example, its price-to-book ratio is near multi-year highs. But it bears repeating that as long as you remain patient, it's actually never a bad time to buy Berkshire stock. For example, if you bought stocks in early 2000, near the peak of the dot-com bubble, you would have received a total return double the one S&P 500 Index.
Compared to other multi-trillion-dollar businesses, Berkshire Hathaway is cheap — and not because its value can double or triple in a year. This is unlikely for a business of this nature. But Berkshire is cheap because, as Buffett often reminds shareholders, the company is built for the long term. If you remain patient, Berkshire Hathaway remains one of the most reliable investment opportunities.
Before buying Berkshire Hathaway stock, consider the following factors:
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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool owns and recommends Apple, Berkshire Hathaway, and Tesla. The Motley Fool has a disclosure policy.
It’s one of the biggest companies in the world…and the stock is an absolute bargain Originally Posted by The Motley Fool