The stock market has taken a big hit with the double whammy of the coronavirus pandemic and an oil price war between Saudi Arabia and Russia. Considering that things could get even more difficult before they get better, we wrote recently about safe investments for a ten year recession. In general, we stick to general principles for investing in stocks and only mention individual investments as examples. However, there is one investment opportunity in the current market mess that we believe is worth looking at. Warren Buffett’s company has been stockpiling cash for a couple of years and has the wherewithal to make major purchases at this time of low prices. Is Berkshire Hathaway a good investment?
Is Berkshire Hathaway a Good Investment?
We have often used Warren Buffett and his company as an example of the use of intrinsic stock value as a guide to profitable investing. And, we mentioned his so-called silent warning for investors in that he was stockpiling cash because he did not find any stocks that fit his criteria in an overpriced market. Now we see that The Motley Fool is suggesting the dirt cheap Warren Buffett stock as a current investment opportunity.
The reason I like Berkshire now is the reason why so many investors have hated it recently. The insurance giant has a cash hoard that’s unparalleled, and the coronavirus crash has given Buffett the chance to deploy that money in any of a host of smart ways. Crisis situations like this are what make Buffett stand apart from the crowd. It’s been a long wait, and the amount of cash on Berkshire’s balance sheet weighed on performance during the bull market. Now, though, Berkshire shareholders are likely to get their comeuppance.Yet because Berkshire’s been out of favor, it trades at bargain prices.
Those with long enough memories will recall that Buffett also got out of the market, built up his cash reserve, and waited during the run up to the dot com crash. His comment was that the market did not make any sense.
Individual stocks that comprise the bulk of the Berkshire Hathaway portfolio include Apple, Coca Cola, and a collection of financials including Bank of American, S. Bancorp, American Express, JP Morgan Chase, and Wells Fargo. All of these have taken hits in recent weeks but all or solid investments that will likely reward anyone who buys them at depressed prices and holds them for the long term.
However, the major argument for choosing Berkshire Hathaway itself is that you get Buffett’s expertise and that of his associates such as Charlie Munger. These old guys have been around for decades, tend to anticipate situations like we are in now and routinely walk away with long term profits.
Although there are and will be numerous investment opportunities during this market crash and in the months and years to come, we have to agree with The Motley Fool that picking Berkshire Hathaway Class A or Class B shares and holding on is probably one of the better stock investing options today.
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