With its stock price up by 54% over the past year, it's only natural that some investors are concerned that Berkshire Hathaway (BRK.A -0.60%) (BRK.B -0.52%) might be getting a little too expensive. However, in this Fool Live video clip, recorded on June 14, Fool.com contributor Matt Frankel, CFP, and Industry Focus host Jason Moser explain why they're not too worried.
10 stocks we like better than Berkshire Hathaway (B shares)
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Berkshire Hathaway (B shares) wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of June 7, 2021
Jason Moser: Okay, King Kong has a question here particularly regarding Berkshire, "Great segment, Fools. I bought Berkshire when the market crashed and they had done very well." Matt, do you think this valuation is a good time to add, where do you stand on Berkshire's valuation today?
Matt Frankel: I think of Berkshire as like an S&P index fund for people who want the ability to slightly beat the market. What I mean by that is if you buy an S&P index fund for the purpose of, you know, with the goal of getting a 10% annualized return over time. You buy Berkshire with the goal of getting like 11% or 12%. At least that's how I approach Berkshire as an investment. It's not going to be a home run but it's like an index fund with Warren Buffett running the show. The valuation is reasonable or in other stock price has gone up but the price-to-book is very reasonable stoking in a historical context with Berkshire. I am still a fan of Berkshire at these price levels. I know. I think, Jason, you said you don't own Berkshire because you prefer Markel (MKL -0.38%)? If I'm correct, I'm paraphrasing.
Moser: Yeah, I mean, I had Berkshire and then I had Markel and I thought, yeah, sell Berkshire just to reinvest a decent bit of that in Markel.
Frankel: Right now, Berkshire is trading for a price-to-book of about 1.44. That is actually lower than its three-year average if you exclude 2020. In between 2017 and the end of 2019, it was right around 1.45 to 1.5 range for most of the time. In a historical context, it's still trading at a pretty low price to book value, 2020 was a giant outlier. But I think the valuation is still reasonable. Berkshire has been much more expensive at certain points in its history. I'm not worried about it from a valuation standpoint.
