Although Warren Buffett isn't the CEO of Berkshire Hathaway any longer, his final actions in that role are still being discovered by investors. Berkshire Hathaway operates a massive investment portfolio, and investors don't know how it changes until 45 days after the end of a quarter, when it files a Form 13F with the Securities and Exchange Commission (SEC). So we'll find out more about what Buffett and Berkshire did during his last few days as CEO around Feb. 15.
The last information we have surrounding Berkshire's investments is from Q3. Buffett and Berkshire have always made it a point to invest in easy-to-understand businesses that fall toward the value style of investing. Most artificial intelligence stocks don't fall into either of those groupings, so this new stock may have been a surprise to some investors.
However, I think it was a genius move that jives with Buffett's investment philosophy. Investors shouldn't ignore this multibillion-dollar message, and I think many should follow Berkshire's lead by investing in Alphabet (GOOG 1.69%) (GOOGL 1.66%).
Image source: The Motley Fool.
Buffett finally got around to investing in Alphabet
Buffett has long been a fan of Alphabet's primary business, Google. However, over his long career, Berkshire didn't invest in the company until 2025. Buffett and his team (it's possible more tech-focused investors were the ones to purchase the stock) bought nearly 17 million shares of Alphabet stock during Q3. At today's price, that's about $6 billion worth of Alphabet stock. It's about a 1.9% position in Berkshire's overall investment portfolio, so it's not an insignificant position.
NASDAQ: GOOGL
Key Data Points
I think Berkshire is sending a clear message with this investment: Alphabet will be an AI winner. This wasn't a foregone conclusion at the start of 2025, as Alphabet was well behind its peers in the generative AI race. Now it has caught up to the competition and is emerging as a leader in its field. This validates Berkshire's investment decision, but is it too late to buy now?
Alphabet's price was far different when Berkshire purchased the stock
Because investors don't have instant access to information, we have to decide whether what other companies did in Q3 is a smart move now. A lot has changed with Alphabet stock since then.
The earliest Berkshire could have purchased Alphabet shares during Q3 was July 1. Alphabet's stock traded for about $175 back then -- a far cry from the $330 it trades at today. By the end of Q3, Alphabet's stock had started to rise, and it traded for $243 on Sept. 30.
That's a massive range of stock prices, and it's impossible to know when Berkshire made its purchase of Alphabet stock. The biggest event that occurred in Q3 was the resolution of Alphabet's monopoly case in court. There were fears that Alphabet's business could be broken up, but the judge ordered only minor changes to Alphabet's business model, keeping it mostly intact. This kick-started a rally, and if Buffett got in before this news dropped, he maximized his gains.
However, that positive news piece has been fully priced into Alphabet's stock, as it now trades for about 30 times forward earnings.
GOOGL PE Ratio (Forward) data by YCharts
That's very different from the 20 times forward earnings Alphabet traded beneath for most of Q3. So if investors choose to buy the stock now, they are going to pay a premium. However, I think it's worth it. Thirty times forward earnings has become the standard for big tech companies, so while it's not undervalued, I don't think it's overvalued, either. Alphabet is also leading the way in several fields and putting up strong growth as well.
I think all of this combines for a successful stock pick, and while you won't get the massive returns investors who bought around the same time as Buffett did, I think it can beat the market.
