There are 10 companies in the world that currently have a market cap of more than $1 trillion. It would be reasonable to assume that none of these businesses have bargain stocks. These companies are very well known, and their valuations prove that huge swaths of the market already believe in their prospects.
But there's one company on the list of the largest publicly traded stocks that is arguably a screaming deal. This particular company just saw its valuation dip to less than $1 trillion. Patient investors looking not only for growth, but for protection during market volatility, should take a closer look.
NYSE: BRK.B
Key Data Points
This stock is clearly different from other $1 trillion businesses
With a market cap of about $990 billion, most investors are already very familiar with Berkshire Hathaway (BRK.A 0.39%)(BRK.B 0.28%). But there are a few things that differentiate it from nearly every other mega-cap stock.
Although their business lines may be somewhat diversified, nearly every other company worth nearly a trillion dollars or more focuses on a particular sector. Apple is focused on technology. Saudi Arabian Oil is focused on fossil fuels. Tesla is focused on electric vehicles. Berkshire, meanwhile, isn't reliant on any one sector or industry to thrive. That's due to its unique business model that no other trillion-dollar business can match.
At the core of Berkshire's empire sits a portfolio of insurance companies. These businesses do generate underwriting profit, but more importantly, they generate what Chief Executive Officer Warren Buffett calls "float." Float is essentially interest-free capital. When an insurer writes a policy, it collects a check for the premiums. The insurer will eventually pay out most of these premiums when a claim is filed, but that process doesn't typically happen for months, if not years, after the policy is taken out. In the meantime, the insurer gets to keep and invest the premium payment, earning money on this interest-free capital.
Buffett has used this capital to invest in other businesses -- everything from tech and energy to transportation and consumer products. Over time, these investments have grown to gargantuan levels. Most of Berkshire's value today does not stem from its core insurance businesses, but rather from its sprawling portfolio of fully owned and publicly traded securities. You'd recognize many of Berkshire's positions. But most are businesses you've never heard of, spanning industries you scarcely think about, like drywall manufacturing and Latin American banks.
Clearly, Berkshire is different from its trillion-dollar peers. This is exactly what makes it a bargain in today's market environment.
This is what makes Berkshire Hathaway stock a bargain right now
No one can predict where the stock market will head next. Although the list of the largest publicly traded companies is currently dominated by technology giants, specifically those involved in artificial intelligence and cloud computing, there's no guarantee that these stocks will be the winners in 2025. The businesses will likely do very well, even though stock prices are based on expectations versus reality. Right now, certain sectors like tech are on the rise amid towering expectations. But as past market cycles prove, what goes up can easily go down, or at least lag behind the overall market in any given year -- or even for many years.
With Berkshire Hathaway, you don't need to think about this sector-specific risk because the conglomerate is diversified across industries and regions. Buying Berkshire stock is nearly akin to buying a diversified stock market index fund. But instead of a fund passively tracking an index, you get Warren Buffett, one of the best active investors in history.
To be sure, Berkshire stock doesn't look like a bargain according to many traditional valuation metrics. Its price-to-book ratio, for instance, is near multi-year highs. But it bears repeating that there has literally never been a bad time to buy Berkshire stock, provided you remain patient. If you bought shares at the start of 2000, for example, near the height of the dot-com bubble, you would have racked up a total return double that of the S&P 500.
Berkshire is a bargain compared to other trillion-dollar businesses -- not because it can double or triple in value over a given year. That's very unlikely for a business of this nature. But Berkshire is a bargain because, as Buffett often reminds shareholders, the company is built for the long haul. If you remain patient, Berkshire Hathaway is still one of the most reliable investment opportunities out there.
