Is Berkshire Hathaway Stock a Buy Now?

Berkshire Hathaway (BRK.B) has long been a bellwether of value investing, guided by Warren Buffett’s legendary track record. Yet even this titan faces scrutiny as investors weigh its recent performance, valuation, and future prospects. With its stock up 17% year-to-date (YTD) in early 2025 while the S&P 500 slumped 8.3%, the question is: Is this a prudent buy now, or is the premium price a red flag?

The Bull Case: Strength in Operations and Cash

Berkshire’s recent performance is underpinned by robust operational growth. In 2024, operating earnings—a metric excluding volatile stock and bond valuations—jumped 27% to $47.4 billion, driven by its controlled businesses. These include the BNSF railroad, Berkshire Hathaway Energy (BHE), and subsidiaries like Benjamin Moore and Duracell, which collectively contributed 84% of operating earnings. The insurance segment, led by Ajit Jain, also thrived, accounting for 47.8% of total operating profits.

The company’s cash reserves, now $334.2 billion, are a critical advantage. This liquidity allows Berkshire to capitalize on market dips, as seen in past recessions. For instance, its 2020 purchases of $10 billion in Bank of America and Chevron stock at pandemic lows later proved profitable. Analysts note that while the stock’s price-to-book (P/B) ratio has risen to a 10-year high of 1.8, Buffett’s historical buyback threshold of 1.2 is less relevant today given the shift toward operational assets.

The Bear Case: Valuation Pressures and Debt Risks

Critics argue the stock’s surge has pushed it into overvalued territory. Its Forward P/E of 25.65 far exceeds the Insurance – Property and Casualty sector’s average of 11.57. Even when adjusted for net cash (subtracting $124.8 billion in debt), the valuation of 13.8x operating earnings is above historical averages.

Debt remains a concern. While Berkshire’s $124.8 billion in borrowings are manageable, much of it is tied to subsidiaries like BNSF and BHE, which face sector-specific risks. Rising interest rates could pressure earnings if refinancing costs rise.

Earnings Outlook: A Mixed Bag

Q1 2025 earnings, due May 5, are projected to show a 7.3% year-over-year decline in EPS to $4.70, reflecting headwinds in some divisions. However, the company’s operating businesses remain resilient. BNSF, for example, is benefiting from strong demand for rail logistics, while BHE’s energy infrastructure plays to long-term trends.

The Bottom Line: A Hold with Long-Term Appeal

Berkshire’s $1.15 trillion market cap and YTD outperformance make it a compelling holding for patient investors. Its cash reserves and controlled businesses provide a defensive moat in volatile markets, while Buffett’s track record of deploying capital opportunistically remains unmatched.

However, current valuations suggest caution for new buyers. At a Forward P/E of 25.65, the stock is less attractive than during past dips. Investors should consider staged purchases if the price corrects to a P/B below 1.5 or P/E closer to 20.

Final Analysis:
Berkshire Hathaway is a hold for existing investors and a selective buy for newcomers at lower valuations. Its operational strength and cash firepower justify its premium, but the stock’s recent gains leave little margin for error. As Buffett himself might say, timing is everything—and patience could be rewarded.

Data as of early 2025. Past performance does not guarantee future results.