No. of Recommendations: 5
“We believe that the current share price represents an attractive entry point for long-term investors. Berkshire’s revenue and earnings benefit from a diverse group of operating companies, “Shanahan wrote.
“In addition, Berkshire holds almost $350 billion in cash on the balance sheet, which could prove to be a strong earnings catalyst, should the company invest heavily in operating companies, individual stocks and/or Berkshire’s own shares.”
All that seems pretty fair to me.
The current share price is unlikely to represent an attractive entry point for short-term investors, but if you are patient (i.e. a long-term investor), $496 will probably end up being a perfectly good price to buy at. And the cash could be a strong catalyst, if Berkshireends up being able to buy something with it. For the moment, there are probably no big operatiing companies available at a price that makes sense, either as full acquisitions or as individual stocks, and Berkshire has held off repurchasing shares since Q1 2024, i.e. when B-share prices were between $365 and $430. I think Berkshire is unlikely to repurchase shares at $496. So none of the conditions EJ refers to as catalysts can be said to apply right now, but it is reasonable to think there's a good chance share prices of a lot of things, including Berkshire, will be a fair bit lower in the next year or two.
Given that optionality, owning Berkshire shares now is not crazy. If the price goes a little lower (say $450), I would be a buyer of shares, and if the price goes a little higher (say $525), I would be selling more puts, the selling of which has been a reasonably profitable consolation for me for the last couple of years, in the absence of share ownership north of $425.
DTB
