Berkshire Hathaway (BRK-B)
Holding / Seguros / Conglomerado
Buffett's conglomerate —insurance with ~$176bn of costless float, ~$700bn of investments, and a collection of operating businesses (BNSF, energy, manufacturing)— now run by Greg Abel. At ~$504 (~1× book value) it trades at a modest discount to its intrinsic value on the two-column basis: Fairly valued, with the record $397bn of cash and succession as the two variables.
- Price
- $504.26
- Intrinsic value (5y, base)
- $729
- Total annual return (5y)
- 7.7%
- Status (nominal)
- Fairly valued
- Margin of safety
- +14%
The essentials
- A three-engine holding company: insurance with ~$176bn of negative-cost float + ~$700bn of investments (stocks $288bn + cash/T-bills $397bn) + operating businesses (BNSF, BHE, manufacturing).
- GAAP net income ($67bn FY25) is mark-to-market noise → valued on operating earnings (~$44.5bn) and on the two-column sum of the parts (equivalent to ~1.5× book value).
- Greg Abel is CEO since Jan-1-2026 (Buffett, Chairman). The record $397bn of cash and succession are the two variables of the case; no dividend, buyback only just resumed.
Intrinsic value — two valuation methods
By both methods, the value today (DCF $712 · Multiples $601) exceeds the market price ($504).
Pillars of the analysis
The verdict — today vs 5 years
Today — fairly valued: at $504 trades ~16.1% below its value discounted to today (~$601); the discount is positive but does not reach the margin of safety we require (≥38%).
At 5 years — En valor: the target price ($749) plus dividends yield between the 4% floor and the 10% average return — a reasonable return, though without the margin of a great investment.
The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$372.
Thesis
The business
Berkshire is a compounder of the highest quality and the lowest fragility: insurance with negative-cost float, an investment portfolio of ~$700bn (stocks + cash), and durable operating businesses (BNSF, BHE, manufacturing). It retains all of its earnings (no dividend) and reinvests them at returns above the opportunity cost. The flip side: size slows the pace of compounding, $397bn of cash earns little while it waits for opportunities, and the Buffett-to-Abel succession is the governance question.
The valuation
It is valued on a two-column sum of the parts: (1) the investment portfolio (~$700bn: stocks at market + cash and Treasury bills), and (2) the operating businesses, capitalizing their earnings ex-investments (~$30bn) at a multiple — without double-counting the investment income, which already sits in column 1. GAAP net income is of no use (it is mark-to-market noise).
The base scenario projects a value of ~$749 per share over five years, an annual return of ~+8% from the current ~$504. At today's price it trades at ~1× book value (historical range 1.3-1.8×), a modest discount to the two-column intrinsic value (~1.5× book). Value compounds with equity at ~8% a year.
The margin of safety
The verdict is Fairly valued: It trades close to intrinsic value, far from the required margin of safety.. At ~$504 the expected return (~+8%) sits close to the required average return (10%) but below it: Berkshire compounds value resiliently, at a modest discount to its intrinsic value, but without the large margin of safety. The downside protection is real —the fortress balance sheet and the record cash cushion it—, and the buyback behavior itself (zero in 2025, a touch in 2026) signals that management sees it just below intrinsic value.
What to watch
Two fronts. Succession: if Abel sustains the capital-allocation discipline and the culture, the valuation premium holds; if not, it compresses. And the deployment of the cash: $397bn yielding ~3.7% is a drag — the key signal is whether Abel invests it at attractive returns (the first clues: the $9.7bn OxyChem acquisition and the resumed buyback). Beneath that: the portfolio's concentration (Apple ~22%) and catastrophe risk in insurance.
Educational / informational. Does not constitute investment advice.