When most people talk about buying like Warren Buffett, they usually mean they’re value investors looking for undervalued assets that still have potential. There’s another way to be like Buffett, though—by buying Berkshire Hathaway (NYSE: BRK.B) stock.
Owning a piece of the Oracle of Omaha’s company—he’s the chairman and CEO of this diversified holding operation—gives you access to the billionaire’s investment approach; his myriad holdings and a ticket to the company’s popular annual general meeting, better known as the “Woodstock of capitalism,” which took place on May 4.
While the company isn’t widely watched by analysts, most of the people who do follow it say Berkshire is a buy. A May 3 report from Tom Lewandowski, an analyst with Edward Jones, reiterated his buy rating on the stock.
One reason for the optimistic outlook is that Berkshire is about as diverse a business as they come. It owns insurance, railroads, utilities, manufacturing and retail companies. “We would consider many of these businesses as leaders in their industries and we generally view a significant portion of the company as defensive in nature,” wrote Lewandowski.
Its holdings also generate a “large amount of aggregate cash flow,” and most are profitable.
No one’s quite sure what will happen after the 82-year-old Buffett leaves the company, which will likely only happen when he dies or is somehow incapacitated. He has said that he has already chosen his replacement, but he refuses to say who he’s picked. While money managers Todd Combs and Ted Weschler have taken a greater role in managing Berkshire’s $88 billion portfolio, people still want to know who’s going to eventually take over the CEO role. Lewandowski calls the communication between the company and its shareholders “inadequate.”
Lewandowski also thinks that while there are risks in the near-term, the businesses it owns are still solid companies that “support a higher multiple than where shares trade currently.” In other words, Berkshire’s shares are attractively valued for long-term investors.
Berkshire Hathaway continues to make deals too. On May 3 it announced that it would acquire the 20% of Iscar Metalworking that it doesn’t already own. The Israeli company manufactures a variety of metalworking tools used in developed and emerging markets. It also purchased 50% of condiment maker Heinz in February.
Most investors will only be able to afford the company’s class B shares. They trade at $110 a share and come with less voting rights than the more expensive class A shares, which trade at a whopping $165,400 per share. Cathy Seifert, an S&P Capital IQ analyst who has a hold rating on the stock, thinks its class B shares could climb to $116 over the next 12 months, while Jay Gelb, a Barclays analyst with an overweight rating, says it will hit $126 by next year.
This will likely be a slow and steady grower—though it is up 23% year-to-date—but it’s hard to go wrong investing like, and with, one of the world’s best investors.
For more investing insights, follow Bryan on Twitter @bborzyko.