Berkshire Hathaway Inc. (BRK.B), Warren Buffett’s $485 billion conglomerate, is one of corporate America’s great cash machines. As investors ploughed money into sexy tech IPOs of late and Buffett’s Kraft Heinz bet soured, the Oracle of Omaha seemed to lose some of his luster.
As a result, Berkshire’s price suffered. However, after reaching a low in December 2018 of $185, the BRK/B share price has proven to remain resilient during 2019 in the face of geopolitical uncertainty and global recession fears and currently sits at $206 per share, less than 9% away from its all time high of $224. This has been rather pleasing as it demonstrates that both domestic US and international investors continue to have a high level of confidence in Warren Buffet, Charlie Munger and their wider investment team. As an example, Bill Ackman’s Pershing Square Capital gave Berkshire a vote of confidence by snatching up $685 million of Berkshire stock recently.
At Sequoia, we remain bullish on the wider US equity market given the relative attractiveness of the USD and the US as a country for investment compared to other major global economies including, in particular, Europe, UK, and Hong Kong. Further, Berkshire is considered a more defensive option compared to many other major stock names in the US due to Berkshire’s cash-generating utilities, railroads, and consumer businesses. Therefore, in the event that the market faces further uncertainty in the future we expect Berkshire to outperform other more aggressive growth stocks in the US as investors seek stability and safety first during a time when geopolitical tensions dominate the headlines. Such a scenario may also provide Warren Buffet with an opportunity to further deploy the $119 billion of cash sitting on it’s balance sheet cash (as at 31 December 2018).
Offer Close Date: 23 October 2019
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The information above are the opinions of Sequoia Asset Management Pty Ltd and is general advice only. General advice is advice which is provided without regard to your individual objectives, financial situation or needs. Please download and read the PDS before deciding whether this investment is right for you.