Should You Buy Berkshire Hathaway While It's Below $550?

Geoffrey Seiler, The Motley Fool

Sat, Mar 22, 2025, 11:05 AM 5 min read

While the stock market has been selling off recently, one stock that has bucked the trend is Berkshire Hathaway (NYSE: BRK.B) (NYSE: BRK.A). Its shares are up more than 15% year to date as of this writing, and the stock is trading near an all-time high.

Let's look at why Berkshire has outperformed the market and whether the stock is a buy at current levels.

One of the big reasons for Berkshire's strong performance in the face of market declines is the huge cash position it has built. The company essentially acts as the investment vehicle for its CEO and famed investor, Warren Buffett. Berkshire is a conglomerate that owns businesses in a variety of sectors, but Buffett is particularly fond of insurance companies, since he gets access to capital through their float.

Float is simply the money insurance companies collect from policyholders and hold until a claim is paid out. Most insurance companies take this cash and invest it in fixed-income instruments like bonds to generate income. However, Buffett has eschewed this typical insurance company strategy in favor of investing in high-quality stocks.

It's a unique strategy in the industry that has vaulted Berkshire to being of the largest companies in the world by market cap. However, over the past several quarters, Buffett has been much more interested in selling stocks and compiling cash than in investing. In fact, last year he only purchased about $9 billion worth of stock while selling more than $143 billion. This included significantly reducing positions in his top holdings, such as Apple and Bank of America.

Combined with the cash flow the company generated for the year, this left Berkshire with a whopping $334 billion in cash on its balance sheet at year-end. In the investing industry, this is known as dry powder, which is essentially money on the sidelines that can be used to make investments. Berkshire has plenty of dry powder at the moment and one of the greatest value investors of all time at the helm to buy stocks when he feels the timing is right.

Now a simple market correction may not be enough to get Buffett back to aggressively buying stocks. He started to pull back from stocks in the first half of 2024 and the major market indexes like the S&P 500 are still higher than they were at the end of June 2024. However, if any individual stocks become attractive, Buffett has a lot of cash to deploy.

Although this current market environment attracts investors to Berkshire's dry powder, that doesn't necessarily make the stock a good buy at current levels. In addition to selling down stock positions over the past year, Buffett also decided to stop buying back Berkshire stock.