Warren Buffett is well known for his investment mind. It is particularly popular with long-term investors who value large companies with well-priced stocks.
Yet even though Buffett’s preferred holding period is eternal, the wallet at Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) that the Oracle of Omaha manages saw a lot of revenue in 2020. The airline stocks were launched at the start of this year, as Buffett concluded that the coronavirus pandemic had fundamentally and definitely changed the dynamics of passenger carriers. Berkshire also made big changes in its bank holdings, selling stakes in many Wall Street banks while strengthening its position in the Bank of America.
The sale went way beyond what was expected. Buffett even dumped long ago Wholesale Costco and also drastically reduced its somewhat surprising stake in the mining giant Barrel gold.
On the purchasing side, we have seen a lot of new businesses entering the field. Pharmaceutical stocks gained big in the third quarter, as Buffett bought shares of Merck (NYSE: MRK), AbbVie (NYSE: ABBV), and Bristol Myers Squibb (NYSE: BMY). The Berkshire CEO even played the IPO game by participating in the initial offering of Snowflake (NYSE: SNOW) stocks, jumping into the realm of SaaS stocks.
Like a Sideboard Fan, I don’t think all of this activity tells me much about which stocks I should buy for my own individual portfolio. I only see one Buffett stock with real appeal to the investing legend enthusiast.
It’s the Buffett share to buy
If you are looking for real Buffett stock to put in your wallet, the best choice is Berkshire Hathaway itself. There are two reasons for this: one is fundamental and the other is based more on its share price.
The fundamental reason Berkshire Hathaway is a solid investment has to do with its core insurance business model. The company run by Buffett has the money to invest in the stocks Berkshire chooses because the insurance unit collects premiums up front and only has to pay claims later – a lot later in some lines of insurance policies. As Berkshire’s insurance business grows, so does the ability to expand its portfolio.
Meanwhile, the Berkshire Hathaway share price remains attractive, even after a significant rally of almost 35% since March. Over the past three years, Berkshire shares have only risen 16%, compared to S&P 500 returns nearly 50% over the same period.
Why buy a poor performing stock?
Some detractors of Buffett argue that the only reason Berkshire shares were valued is the reason not to buy the shares. Buffett has lost contact, they say. The pop of airline stocks right after Berkshire sold them is just the most recent example cited by critics.
I’ve been an investor long enough to remember the last time the stock community kicked Buffett out. In the late 1990s, Buffett refused to embark on the tech boom. Berkshire stocks have underperformed massively. But in the ensuing tech bear market, Berkshire gained ground as these tech giants plunged.
I’m not saying the current boom in high-growth digital disruptors will inevitably sink the market. I am convinced, however, that investing styles come and go. At some point – probably when the momentum games have burned the maximum number of investors possible – the Buffett approach will come back into fashion.
Berkshire itself sees its stock value, having significantly increased its share buybacks in 2020. Buffett no longer places much emphasis on book value, but with the stock at 1.3 times the same book value. after its recent surge, few would say that Berkshire is too expensive.
Add a Buffett exhibition to your portfolio
Warren Buffett is 90 years old, but the investments he made will continue to generate solid returns long after he is no longer running the company he put forward. Whether you want to add a value favorite to offset growth stocks elsewhere or just want Buffett on your side, Berkshire Hathaway remains a Buffett stock worth buying.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.