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Value stocks have generally outperformed growth stocks year-to-date (YTD), although growth has really closed the gap in the past month or so.
The Russell 1000 Value Index, which tracks large and midcap value stocks, is up about 2% YTD, while the Russell 1000 Growth Index is basically flat. But among large caps, growth is beating value with the S&P 500 Growth Index up roughly 3.7% YTD and the S&P 500 Value Index down 0.8% so far this year.
But with uncertain markets ahead, it will be important to have some good steady value stocks in your portfolio to balance out the volatility that may come from growth stocks.
If you’re looking for a good value name to add to your portfolio, consider Berkshire Hathaway (NYSE:BRKb) (NYSE:BRKa) — the house that Buffett built.
No better time to consider Berkshire Hathaway
There have not been too many better occasions to buy stock in one of the best, most consistent and well-run companies on the market than now.
Since the conglomerate run by Warren Buffett announced first quarter earnings last month, Berkshire Hathaway stock is down about 10%, with its B shares trading at around $488 per share.
One of the reasons for the dip is subpar first quarter operating earnings, which declined year-over-year and missed estimates. This was mainly due to high insurance underwriting costs, primarily due to the California wildfires. While Berkshire Hathaway owns dozens of businesses across various different industries, insurance is one of the most prominent, as it owns GEICO as well as its own Berkshire Hathaway Specialty Insurance, among others.
The other reason is likely the uncertainty around the changing of the guard, as Berkshire announced last month that Warren Buffett is retiring at the end of the year as CEO. His long-time vice chair Greg Abel will take the reins as CEO, while Buffett will remain on as board chairman.
This, and other factors, have caused some analysts to dial back their price targets, which have also led to the stock price falling.
A great opportunity to buy the dip
I’m not going to say there’s never been a better time to buy Berkshire Hathaway stock, because there have been other great occasions to do so. But this is certainly one of them.
The opportunity to get one of the greatest companies in the world at a 10% discount is hard to ignore.
Some analysts have suggested that without Buffett and the premium he provided over the past 50 years, the stock won’t have the same performance. But Abel and the new executive team have been by his side for years and Abel has been groomed for this position for almost five years now, since the transition was first announced.
The other concern might be how much Buffett and his team have pared back the portfolio, reducing it by around $100 billion over the past year or so. Looking at the market, it was a good idea, as stock have struggled, and there’s no doubt that Buffett, Abel and the team will be looking to use that dry gunpowder to find good values.
Finally, Berkshire Hathaway was built to outperform in difficult markets, just by the way it is structured. It owns some 60 companies, most of them stable, value-oriented firms in industries like construction, industrial, insurance, and generally industries that are consumer staples.
Even with the 10% dip, the stock is still up 8% YTD, beating the market. And with a P/E ratio of 13, it is indeed a great value.
