Is Berkshire Hathaway A Value Stock?

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With value stocks outperforming in 2022, value investing has come back in favor.

And that means the cult of Warren Buffett, and Berkshire Hathaway is back. At the end of 2022, there was a chart making the rounds on Twitter that compared Cathie Wood’s ARK Innovation performance over the last 5 years with Berkshire Hathaway’s.

As you might have guessed, Berkshire Hathaway is outperforming thanks to ARKK’s terrible 2022. Over the last 5 years, Berkshire Hathaway is up 76.3% while ARKK is down 18.9%.

Meanwhile, many investors are diving into Berkshire Hathaway’s stock in search of safety. Over the last three months, Berkshire’s B shares are up 19.3% versus the S&P 500’s gain of 10.5%.

But is Berkshire Hathaway itself even a value stock?

Should value investors be investing in the stock, and its large holdings?


Is there Value in Berkshire Hathaway?

1.       Berkshire Hathaway (BRK-B - Free Report)

Berkshire Hathaway is a large cap holding company that owns dozens of businesses, cash and equity investments. Reminder: it’s not a mutual fund or an ETF fund. It’s a corporation with Warren Buffett as Chairman and CEO.

Berkshire Hathaway trades with a forward P/E of 19, which is more expensive than the S&P 500 and is not in the normal range for most value investors. Tracey usually looks for companies trading under 15.

What about its PEG ratio? Berkshire Hathaway has a PEG of 2.7, which does not indicate value either. A PEG under 1.0 indicates a company has growth and value.

However, Berkshire does have a P/B ratio of 1.5, which is under 3.0 and indicates value.

Is a low P/B ratio enough for value investors or should they wait for a sell-off in the Berkshire Hathaway shares?

2.       Apple Corp. (AAPL - Free Report)

Apple is Berkshire’s largest equity holding. It was cheap when Buffett first bought it in 2016, with a forward P/E of around 10.

But in 2023, it is trading at 21x, which is much higher than the S&P 500 which is trading around 18. Apple has a PEG of 1.7.

Additionally, earnings are expected to rise just 1% in fiscal 2023 so there isn’t much growth there either.

Should value investors take a pass on Apple?

3.       Bank of America (BAC - Free Report)

Bank of America is Berkshire’s second-largest holding, and has been for several years. Warren Buffett has been patient with Bank of America, even while selling many of his other bank stocks.

Shares of Bank of America are down 30% in the last year. It’s cheap with a forward P/E of 9.5. But with banks, investors should also look at P/B ratio. Bank of America’s is 1.15. With banks, a P/B ratio near 1.0 indicates there’s value.

Should investors join Buffett and add Bank of America to their own short list?

4.       Chevron Corp. (CVX - Free Report)

Chevron suddenly became the third largest position in Berkshire’s portfolio, at 8%, last year when Buffett went all in on the energy stocks.

Chevron shares surged in 2022, rising 36.9% as energy was the best-performing sector for the second year in a row. But it remains cheap as earnings have also risen. Chevron is trading with a forward P/E of just 10.8.

It’s yielding 3.2% now.

Should you follow Buffett into the energy trade, or is it too late to jump into Chevron?

5.       The Coca-Cola Company (KO - Free Report)

Coca-Cola has been in the Berkshire portfolio since the first quarter of 2001. Berkshire has held it through the Great Recession and the pandemic. It’s still the fourth-largest position in the portfolio.

Coca-Cola shares are up 25% over the last 2 years, versus just 5.4% for the S&P 500.

But shares aren’t cheap. It trades with a forward P/E of 24.4. And Coca-Cola has a PEG ratio of 3.9.

Is Coca-Cola too expensive for value investors in 2023?


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In full disclosure, Tracey owns BAC in Zacks Value Investor portfolio.

Disclaimer: Neither Zacks Investment Research, Inc. nor its Information Providers can guarantee the accuracy, ...

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