Berkshire Hathaway (BRK.A 0.47%) (BRK.B +0.24%) stock is trading down 11.9% since Warren Buffett announced that he would remain chairman but would pass the CEO torch to Greg Abel by the beginning of 2026. During that same period, the S&P 500 has rallied by over 20%.
Here's why long-term investors shouldn't be worried about Berkshire's sell-off, and why the value stock remains a great buy now.
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Berkshire continues to swim against the market's current
Berkshire Hathaway was crushing the major indexes earlier this year as investors flocked to safe stocks amid tariff uncertainty. But the market has recovered and megacap growth stocks are roaring to new heights -- including Nvidia becoming the first company to surpass $5 trillion in market cap.
Berkshire just reported its third-quarter results, which included excellent operating earnings. Berkshire's cash, cash equivalents, and Treasury bills surged to a record $382 billion -- a sign that Buffett and his team are still finding limited buying opportunities in today's premium-priced market. However, Berkshire did announce a $9.7 billion acquisition in October. But that deal was in the energy sector, as Berkshire remains a contrarian by not putting significant capital to work in artificial intelligence (AI) growth stocks.
It's also worth noting that Berkshire had a ton of cash during the tariff-induced marketwide plunge in April. Some investors may be disappointed that Berkshire didn't at least buy some of the more value-focused megacap growth stocks. I thought that Berkshire might build a position in Alphabet (GOOG +1.22%) (GOOGL +1.09%) -- given it was beyond cheap at just 17.7 times earnings after reporting its first-quarter 2025 earnings. Since its 52-week low, Alphabet has more than doubled from its 52-week low and surpassed Amazon as the fourth most valuable company in the world behind Nvidia, Apple, and Microsoft.
NYSE: BRK.B
Key Data Points
Berkshire has plenty of ways to generate steady earnings growth
Some investors may look at Berkshire's unwillingness to put its cash pile to work as too cautious -- especially considering Berkshire was chock-full of cash during the sharpest sell-off since spring 2020 during the COVID-19 pandemic. But hindsight is 20/20. And going forward, it's best to focus on where Berkshire could be going rather than what it could have done.
Berkshire generates stable operating earnings from a diverse portfolio of controlled businesses. Its insurance businesses produce underwriting earnings and insurance investment income from Berkshire's float, which is the stockpile of premiums that haven't been paid out in claims. Berkshire uses this float to generate billions of income each quarter. Berkshire also makes money from its manufacturing, services, and retail businesses, ownership of BNSF railroad, and the Berkshire Hathaway Energy utility and energy business. In this vein, Berkshire has several levers it can pull to grow its operating earnings across a diversified pool of global businesses.
Berkshire is a top value stock to buy now
The value of Berkshire's cash, cash equivalents, Treasury bills, and positions in public equities is $694.8 billion -- meaning that the market is only valuating its controlled businesses at roughly $331.2 billion based on Berkshire's market cap at the time of this writing. That's arguably too little compared to the operating earnings these segments are generating.
All told, Berkshire is a great buy for long-term value investors as well as folks looking to round out their portfolios with an industry-leading company that isn't betting big on AI.
