Berkshire Hathaway (BRKA 0.46%)(BRKB 0.34%) has undergone its biggest change in over half a century. With Warren Buffett's retirement as CEO, the conglomerate has a new leader for the first time since he took over the former textile manufacturer in 1965. While change often brings uncertainty, the company is exceptionally well-positioned to continue thriving.
Here are two reasons to buy Berkshire Hathaway stock like there's no tomorrow.
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The comfort of cash
Berkshire Hathaway ended the third quarter with a record cash position of $381.7 billion. The company has built up its massive cash war chest by retaining earnings from its operating businesses and dividends from its investments. It has also been selectively selling down some of its stock portfolio, including significantly reducing its position in its top holding, Apple, which it has cut by 75% since the middle of 2023.
The company's massive cash position gives it so much optionality. It could meaningfully capitalize on a major market downturn by scooping up shares of great public companies at better prices. Berkshire could also buy back more of its stock if the share price starts to slump. Additionally, Berkshire could acquire more high-quality companies as opportunities emerge. Its cash position gives new CEO Greg Abel multiple ways to grow shareholder value going forward.
NYSE: BRKB
Key Data Points
Well insulated from potential AI disruptions
There are growing concerns among investors about how distributive AI might be in specific industries. Most recently, much of the market's unease has focused on AI's potential impact on the software sector.
While Berkshire Hathaway isn't completely immune to the potential disruptions of AI, it's much more insulated than other companies. That's due in part to Buffett and Munger's long-standing aversion to investing in tech stocks. They preferred to invest in businesses they could reasonably understand.
As a result, the operating companies Berkshire Hathaway owns are less susceptible to technological disruption. It owns insurance companies, a railroad, utilities and energy businesses, manufacturing businesses, and several service and retail companies. While some of its insurance operations are at risk of technological disruption (e.g., self-driving cars could significantly reduce the number of accidents and insurance companies' volumes), the company's utilities and energy businesses will benefit from AI-driven demand for natural gas and electricity.
Meanwhile, the company's investment portfolio primarily comprises companies less susceptible to AI disruption. Aside from Apple, the only other tech stocks Berkshire owns are Alphabet and Amazon, which are emerging as AI leaders. Other notable holdings include beverage giant Coca-Cola, energy companies Chevron and Occidental Petroleum, and several leading financial services companies. Many of those companies will either benefit from AI-driven demand or can integrate that technology into their operations to increase productivity.
Positioned to continue thriving
Warren Buffett left Berkshire Hathaway in an excellent position. It has a cash-rich balance sheet, giving the company meaningful capital to grow shareholder value. Berkshire has also built a portfolio of operating companies and investments that are largely immune to disruption from AI and other technologies. Those two reasons should give investors the confidence to buy Berkshire stock amid all the uncertainty.
