Berkshire: Still Cheap, Honestly

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Right. So, everyone’s having a little wobble about Berkshire Hathaway since the Big Man stepped back. Shares are down a bit, the S&P 500 is…not. It’s not a disaster, obviously. But the hand-wringing is…predictable. People always need a villain, a reason for things not going exactly to plan. Like the market owes them a perfectly smooth ride. Honestly.

Since Buffett announced his exit last May, Berkshire’s underperformed the S&P by a rather embarrassing 32 percentage points. Thirty-two! It’s enough to make you question everything, isn’t it? Like maybe we all got a bit carried away with the Buffett premium. The idea that a single person – however brilliant – could magically inflate a company’s value. Turns out, people do matter. Who knew?

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But here’s the thing. Before everyone starts panicking and selling, let’s talk about the bits that still work. The really good stuff. Because even without the guru at the helm, Berkshire isn’t about to crumble. It’s not like it’s built on sand, you know. Though sometimes, watching the market, you do wonder…

1. The Secret Sauce (Still Simmering)

Buffett, bless him, talked about a “secret sauce.” Sounds a bit dramatic, doesn’t it? Like he was a culinary genius instead of a stock picker. But the point is, it wasn’t magic. It was just…really good companies. American Express and Coca-Cola, for example. Decades of dividends, steadily increasing. Boring, really. But effective. And you know what? They’re still paying out. That’s the bit people seem to forget.

Since 2022, those dividends have jumped 91% and 23% respectively. It’s not exactly rocket science. Just…patience. And a knack for picking businesses that people actually need (or, at least, really want). Visa and Mastercard are the same story. They’ve ramped up dividends by, frankly, ridiculous amounts – 1,686% and 5,700%. I mean, seriously? That’s enough to make you consider a career in payment processing.

And then there’s Apple. The Big One. Berkshire’s trimmed its stake, which is fine. A bit of pruning is healthy. But they still hold 238.2 million shares. The dividend has doubled since Buffett first got involved. And the yield on cost? Around 4.5%. That’s…comfortable. And considering Apple’s earnings jumped 86% last quarter, those payouts aren’t going anywhere. It’s a lovely little earner, really.

2. The Engine (Still Chugging Along)

Buffett called the insurance business the “engine” of Berkshire’s expansion. Which, let’s be honest, is a slightly unglamorous image. I was expecting something more…futuristic. But the point is, it works. They collect premiums, invest the money, and hopefully, pay out less in claims than they take in. It’s a simple idea. And it’s brilliant.

The “float” – that investable cash pile – has swelled to $171 billion. That’s a lot of money. It’s enough to make you feel slightly inadequate. And here’s the best bit: Berkshire gets to invest it for free. No pesky fees, no performance-based charges. Just pure, unadulterated profit. It’s almost unfair, isn’t it? Like finding a twenty in an old coat pocket, but on a slightly larger scale.

They’ve parked most of that cash in U.S. Treasuries, earning a solid 3% to 5%. It’s not going to make anyone a billionaire overnight, but it’s reliable. And it provides a nice cushion. A bit like having a really comfortable mattress. And, crucially, it’s enough to keep the engine chugging along for years to come.

3. Still Cheap, Honestly

Buffett started out as a value investor. A proper one. Paying a fair price for a fantastic business. Then he got a bit…relaxed. Willing to pay a premium for quality. But today? Berkshire is cheap. Properly cheap. Trading at just 15.1 times trailing earnings, while the S&P 500 averages around 30 times. That’s a 50% discount. A fifty percent discount. It’s practically a giveaway.

And with recent earnings growth at 17.3%, it’s not like the company is going backwards. Those dividends are still increasing, the float is still growing, and Berkshire is still, fundamentally, a solid business. It could very well thrive on autopilot. With a new management team understanding that, in most instances, the only thing it has to do is…nothing. Which, honestly, is a surprisingly effective strategy.

There’s an old Buffett quote: “Invest in a business any fool can run, because sooner or later, one will.” Luckily for shareholders, his successor, Greg Abel, isn’t a fool. But in any case, Berkshire Hathaway’s business looks…foolproof. And frankly, that’s a relief.

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2026-01-30 13:52