Will Berkshire Hathaway Help You Retire Rich?http://www.fool.com/retirement/general/2012/09/19/will-berkshire-hathaway-help-you-retire-rich.aspx Dan Caplinger
September 19, 2012
Now more than ever, a comfortable retirement depends on secure, stable investments. Unfortunately, the right stocks for retirement won't just fall into your lap. In this series, I look at 10 measures to show what makes a great retirement-oriented stock.
Few investments inspire the kind of loyalty you'll find from shareholders of Berkshire Hathaway (NYSE: BRK-A ) (NYSE: BRK-B ) . From the adulation of all things Warren Buffett to the tens of thousands of investors who flock to Omaha in pilgrimage for the company's annual shareholder meeting, Berkshire is part investing club, part social club, and part megalithic industrial conglomerate. But, despite all the hype, is the stock a smart investment right now? Below, we'll revisit how Berkshire Hathaway does on our 10-point scale.
The right stocks for retirees
Sure, you still want good returns, but you also need to manage your risk and protect yourself against bear markets, which can maul your finances at the worst possible time. The right stocks combine both of these elements in a single investment.
When scrutinizing a stock, retirees should look for:
With those factors in mind, let's take a closer look at Berkshire Hathaway.
Source: S&P Capital IQ. NM = not meaningful; Berkshire has never paid a dividend. Total score = number of passes.
Since we looked at Berkshire Hathaway last year, the company has seen its score drop by two points. Falling cash flow contributed to the move, but investors who already own shares should be relatively pleased about the stock's 30% jump in the past year despite the impact it's had on valuation.
It can be hard to separate the business of Berkshire from the personality of Buffett. But, when you strip away the legend, Berkshire has a simple business model: build up a core insurance business, write policies that make sense, and do an above-average job of investing money between the time you collect it as insurance premiums and the time you pay it out in claims.
Admittedly, though, Buffett is a huge asset. Companies f