3 Reasons to Buy Berkshire Hathaway Stock Like There's No Tomorrow

I’d rarely include a company’s cash stockpile as a top reason to buy its shares. But Berkshire Hathaway is a unique case. It has a whopping $325.2 billion in cash, cash equivalents, and short-term investments in U.S. Treasury bills. That’s the biggest cash position in Berkshire’s history.

Why is Berkshire’s hefty cash stockpile a reason to buy the stock? It gives Buffett and his team ample resources to put to work if and when the stock market pulls back enough to create excellent buying opportunities.

Buffett’s strategy is to invest only when valuations are attractive relative to earnings growth over a minimum of five years. This approach has been critical for Berkshire in achieving market-beating returns over the long run. I expect Buffett and his investment managers to use the massive cash stockpile to eventually make smart investments that help Berkshire continue to beat the market in the coming years.

There is one main reason why you might not want to buy the stock right now: valuation. Berkshire’s shares trade at 24.6 times forward earnings.

Even Buffett decided against stock buybacks in the third quarter of 2024. That’s unusual for the legendary investor. His reluctance to repurchase shares could be due to Berkshire’s premium valuation.

Some might want to wait until Berkshire’s valuation is more attractive to buy the stock. However, I think Berkshire Hathaway remains an excellent pick for long-term investors.

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*Stock Advisor returns as of December 2, 2024

Bank of America is an advertising partner of Motley Fool Money. American Express is an advertising partner of Motley Fool Money. Keith Speights has positions in Apple and Berkshire Hathaway. The Motley Fool has positions in and recommends Apple, Bank of America, and Berkshire Hathaway. The Motley Fool has a disclosure policy.

3 Reasons to Buy Berkshire Hathaway Stock Like There’s No Tomorrow was originally published by The Motley Fool