Berkshire Hathaway needs little introduction, however, to put some broad numbers around this household name that owns controlling stakes across a wide spectrum of industries, it has a market capitalisation of US$755bn, making it around 7x the size of Commonwealth Bank (CBA) and is expected to generate net profit in FY23 of $US35bn, growing at circa 10%. It trades on an Est. PE of 18x and holds around $US130bn in cash – not a bad war chest that is now actually benefitting from a higher interest rate environment, while it provides optionality if bargains present themselves.
Over the past 5-years, Berkshire has generally traded on an earnings multiple between 19x on the low side and 23x on the high side, although this does stretch at times, with the stock getting to a low of 15x during the 2020 pandemic.
- Buying high-quality stocks when risk/reward presents itself is the cornerstone of our approach, and Berkshire is now throwing up such an opportunity in our view after a ~9% pullback from recent highs.
