There are 10 companies in the world that currently have a market capitalization of more than 1 billion dollars. It would be reasonable to assume that none of these companies have bargain stocks. These companies are very well known, and their valuations prove that large parts of the market already believe in their prospects.
But there is one company on the list the largest publicly traded stocks it undoubtedly screams deal. This company’s valuation just dropped to less than $1 trillion. Patient investors seeking not only growth, but also protection during market volatility should take a closer look.
With a market capitalization of around $990 billion, most investors are already familiar with it Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B). But there are a few things that set it apart from almost everyone else mega-cap stocks.
While their business lines may be somewhat diverse, almost every other company worth nearly a trillion dollars or more is focused on a specific sector. Apple is focused on technology. Saudi Arabian Oil is focused on fossil fuels. Tesla is focused on electric vehicles. Meanwhile, Berkshire doesn’t rely on any one sector or industry to thrive. This is because of its unique business model that no other trillion dollar business can match.
At the heart of the Berkshire empire is a portfolio of insurance companies. These companies generate takeover profits, but more importantly, they generate what CEO Warren Buffett calls “float.” Float is essentially interest-free capital. When an insurer writes a policy, it collects a check for the premiums. The insurer will eventually pay most of those premiums when a claim is made, but that process usually doesn’t happen for months, if not years, after the policy is taken out. Meanwhile, the insurer can keep and invest the premium paid, making money on this interest-free capital.
Buffett has used this capital to invest in other businesses — everything from technology and energy to transportation and consumer products. Over time, these investments have grown to enormous levels. Most of Berkshire’s value today derives not from its core insurance businesses, but from its vast portfolio of wholly owned and publicly traded securities. You would recognize many of the Berkshire positions. But most are companies you’ve never heard of, spanning industries you barely think about, like drywall and Latin American banks.
Clearly, Berkshire is different from its trillion-dollar peers. This is exactly what makes it a bargain in today’s market environment.
No one can predict where the stock market will go next. Although the list of largest public companies is currently dominated by tech giants, especially those in artificial intelligence and cloud computing, there is no guarantee that these stocks will be winners in 2025. Business is likely to do very well, although stock prices are based on expectations versus reality. Currently, certain sectors such as technology are on the rise amid high expectations. But as past market cycles show, what’s rising can easily fall or at least lag the overall market in any given year — or even many years.
With Berkshire Hathaway, you don’t have to think about this sector-specific risk because the conglomerate is diversified across industries and regions. Buying Berkshire stock is almost similar to buying a diversified stock index fund. But instead of a fund passively tracking an index, you got Warren Buffett, one of the best active investors in history.
To be sure, Berkshire stock doesn’t look like a bargain by many traditional valuation metrics. Its price-to-book ratio, for example, is near multi-year highs. But it bears repeating that there is literally never a bad time to buy Berkshire stock, as long as you stay patient. If you had bought the stock in the early 2000s, for example, near the peak of the dot-com bubble, you would have made a total return double the one of S&P 500.
Berkshire is cheap compared to other trillion-dollar companies — not because it can double or triple in value in a given year. This is highly unlikely for a job of this nature. But Berkshire is favorable because, as Buffett often reminds shareholders, the company is built for the long haul. If you stay patient, Berkshire Hathaway is still one of the most reliable investment opportunities.
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Ryan Vanzo has no position in any of the listed stocks. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway and Tesla. The Motley Fool has a disclosure policy.
