Berkshire Hathaway seems to be one of the most incredible and undervalued companies in the US.

BH is incredible because it has over 80 businesses inside of it. These businesses have long term competitive advantages such as regulatory hurdles to compete, such as railroads and power plants. Furthermore, the company has over $170 billion USD in equity investments. Berkshire hathaway also has a bond portfolio valued at $50 billion and cash plus short term investments of $100 billion. The company is valued at around $500 billion USD. These are all huge numbers but the profit the company makes is over $15 billion a year, that is profit from operations and not investments.

Why would we think it's undervalued?

The businesses it has will probably last for 25 - 100 years whereas the businesses are being valued at only 10 - 16 years depending on when you bought into the company. Furthermore, only the businesses equity and bond investments are valued on a quarter to quarter basis, not its ownership of high quality insurance, power, consumer, and railway businesses. It is true that BH is valued everyday on the stock exchange but because it is a conglomerate its PE (Price Earnings Ratio) is lower than other types of businesses.

Regarding the downside,

is that its 2 founders are Warren Buffett, age 87 and Charlie Munger, age 94, are also in later stages of their life. This means that once these 2 founders leave (ie passaway) the new management may not be as capable. Also if there was a $100 billion dollar natural disaster the insurance companies owned by BH would probably take a hit. However BH has around $100 billion USD in cash and short term investments, this exclude its bond and stock portfolio.

As a note BH was around before Warren Buffett and Charlie Munger came along, but it was a dying textile business.

Warren Buffett is the son of a stock broker/senator and Charlie Munger was one of the only a few people to ever get into Harvard Law School without a degree. Warren Buffett is worth over $80 billion USD, one of the top 5 richest people in the world.

These incredibly smart men buy great businesses at fair prices. Furthermore, they invest in global brands they believe will last a long time, and have a moat (ie competitive advantage).

PS1: The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

And YOU?

This long term business and fascinating numbers make us to think if new businesses in the digital crypto world will also succeed in a long term basis as the so called traditional business does ? What is your opinion? Please comment bellow.

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