To say that Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B) has been an enormous winner for investors over the long run can be an understatement. Between 1964 and 2023, Berkshire’s overall gain was a jaw-dropping 4,384,748% — greater than 140 times greater than the S&P 500‘s gain through the period. Berkshire has also outperformed the S&P 500 for the reason that end of 2023.
There might be a reason to take a position within the conglomerate led by Warren Buffett sooner quite than later. The query is: Must you buy Berkshire Hathaway stock before Jan. 30?
You is likely to be wondering what’s special about that date. No, Berkshire Hathaway is not scheduled to report its latest quarterly results then. The corporate’s next quarterly update will probably are available late February. Neither has Berkshire announced every other special event for this week.
Nevertheless, one other company will report its results for the primary quarter of fiscal yr 2025 on Jan. 30 — Apple(NASDAQ: AAPL). And it might be certainly one of Apple’s more vital updates in quite some time. Investors shall be especially concerned about learning how Apple Intelligence, the bundle of recent generative AI features available with iOS 18, affected iPhone sales.
Why does Apple’s quarterly update matter to Berkshire Hathaway? Regardless that Buffett has reduced his company’s stake in the patron technology giant in recent quarters, Apple stays by far the biggest holding in Berkshire’s portfolio. Berkshire is the sixth largest institutional shareholder, owning around 2% of Apple.
Berkshire’s position in Apple currently makes up roughly 6.7% of the conglomerate’s market cap. That is a major enough level that Apple’s performance matters to Berkshire. But just how much does it matter?
Over the past five years, the correlation coefficient between Apple’s and Berkshire’s stock performances using monthly returns is 0.49. That is a moderate correlation; 1.0 could be very strong.
Could Berkshire Hathaway’s share price jump if Apple reports exceptionally great results later this week, though? Possibly. Nevertheless, if history is any guide, don’t count on it.
For instance, Apple blew past Wall Street’s expectations with its fiscal 2020 third-quarter results, reported on July 30, 2020. The corporate also announced a 4-for-1 stock split that excited investors. Apple stock promptly soared 10.5% the subsequent day. Berkshire Hathaway’s share price increased by lower than 1%, a ho-hum move despite Apple’s great quarterly update.
On Jan. 27, 2022, Apple again posted terrific results. Apple CEO Tim Cook’s comments about increased investment in augmented reality also captured investors’ attention. Apple stock jumped 7% the next day. What about Berkshire Hathaway? Its shares also rose, but by a much less impressive 1.7%.
So must you scramble to purchase Berkshire Hathaway stock before Apple reports its results on Jan. 30? Probably not. The higher query, for my part, is: Must you buy Berkshire stock no matter what happens with Apple?
There’s a fairly solid argument that you should not buy Berkshire. Even Buffett doesn’t appear to think his own stock is an incredible pick without delay. After six straight years of stock buybacks, Berkshire didn’t repurchase any of its shares within the third quarter of 2024.
That appears to be a transparent sign Buffett doesn’t view the valuation of the corporate he runs as attractive. Indeed, Berkshire trades at a forward price-to-earnings ratio of 23.6. That is dearer than the stock has been shortly.
Analysts aren’t predicting exceptional growth for Berkshire Hathaway anytime soon, either. The consensus Wall Street estimate is that the conglomerate’s revenue will increase by lower than 1% in 2025, with earnings per share rising by roughly 2%.
Despite these concerns, though, I still think Berkshire Hathaway is a great stock for investors to own over the long run. Its businesses generate reliable money flow. Berkshire offers almost ETF-like diversification, with its subsidiaries and equity holdings spanning a big selection of industries. The corporate also has an enormous money stockpile that it will possibly put to good use when stocks are valued more attractively.
I do not think there’s any reason to rush to take a position in Berkshire. However it’s still a stock to maintain in your radar.
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Keith Speights has positions in Apple and Berkshire Hathaway. The Motley Idiot has positions in and recommends Apple and Berkshire Hathaway. The Motley Idiot has a disclosure policy.