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Welcome to Episode #367 of the Value Investor Podcast.
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
Recently, Tracey looked at the top 10 holdings in the S&P 500 index ETFs for a podcast she was doing with Zacks Director of ETF Research, Neena Mishra. When Tesla’s stock was surging, the top 7 were what became known as the Magnificent 7: Microsoft, Apple, NVIDIA, Amazon, Meta Platforms, Alphabet and Tesla.
But Tesla’s stock plunged 50% this year and that moved it out of not only the top 7, but the top 10 holdings in the S&P 500 altogether.
What stock is now in the 7th position?
Berkshire Hathaway. Warren Buffett’s old economy conglomerate has now joined the elite technology companies at the top.
With Tesla faltering, why not add Berkshire Hathaway to the Magnificent 7 list?
Berkshire Hathaway Versus Alphabet
The argument for including Berkshire Hathaway isn’t as far-fetched as it may seem. When you look at the valuations and fundamentals of Berkshire Hathaway and compare them to some of the other Mag 7 stocks, there are a lot of similarities.
Tracey compared Berkshire Hathaway (BRK.B - Free Report) to Alphabet (GOOGL - Free Report) because Alphabet is one of the cheapest of the Mag 7 stocks.
1. Cash Rich:Berkshire Hathaway had $168 billion in cash as of Dec 31, 2023. Alphabet had $110 billion as of Mar 31, 2024.
2. Share buyback plans:Berkshire bought back $9.2 billion in 2023 and Alphabet announced an additional $70 billion for 2024.
3. Attractive P/E ratios:Berkshire Hathaway’s forward P/E is 22.1 while Alphabet’s is 23.3.
4. Attractive P/S ratios:Berkshire Hathaway’s P/S ratio is 2.4 while Alphabet’s is 6.4
Old Economy Companies in Berkshire Hathaway: Winners?
How do you value the rest of Berkshire’s portfolio in the companies it owns outright? Tracey looked at some publicly traded competitors for ideas.
Sherwin Williams makes paint. Berkshire Hathaway owns competitor Benjamin Moore. Sherwin Williams is not cheap. It’s trading with a forward P/E of 26. In the first quarter, sales at the consumer brand segment fell 7% as fewer homes sold and less remodeling was done.
Sherwin Williams pays a dividend, however, yielding 1%.
Masco Corp. also owns a well-known paint brand: Behr paint. But Masco did not see a restoration of volumes in the first quarter. Volumes fell 4%. Masco expects Behr pain to be down slightly in the first half of the year.
Masco is attractively priced, with a forward P/E of 17.8. Masco also pays a dividend, yielding 1.6%.
Armstrong World Industries makes ceiling and wall system solutions in both residential and commercial settings, including in healthcare facilities and classrooms. Berkshire Hathaway also owns several companies that are in similar old school industries like Shaw Industries which makes flooring.
Armstrong World Industries is trading with a forward P/E of 20.3. It also pays a dividend, yielding about 1%. Armstrong World Industries is a Zacks #2 (Buy) stock.
What Else Do You Need to Know About Berkshire Hathaway Being in the Mag 7?
Tune into this week’s podcast to find out.
[In full disclosure, Tracey owns shares of GOOGL in her own personal portfolio.]
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Why Berkshire Hathaway Should Be in the Magnificent 7
Welcome to Episode #367 of the Value Investor Podcast.
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
Recently, Tracey looked at the top 10 holdings in the S&P 500 index ETFs for a podcast she was doing with Zacks Director of ETF Research, Neena Mishra. When Tesla’s stock was surging, the top 7 were what became known as the Magnificent 7: Microsoft, Apple, NVIDIA, Amazon, Meta Platforms, Alphabet and Tesla.
But Tesla’s stock plunged 50% this year and that moved it out of not only the top 7, but the top 10 holdings in the S&P 500 altogether.
What stock is now in the 7th position?
Berkshire Hathaway. Warren Buffett’s old economy conglomerate has now joined the elite technology companies at the top.
With Tesla faltering, why not add Berkshire Hathaway to the Magnificent 7 list?
Berkshire Hathaway Versus Alphabet
The argument for including Berkshire Hathaway isn’t as far-fetched as it may seem. When you look at the valuations and fundamentals of Berkshire Hathaway and compare them to some of the other Mag 7 stocks, there are a lot of similarities.
Tracey compared Berkshire Hathaway (BRK.B - Free Report) to Alphabet (GOOGL - Free Report) because Alphabet is one of the cheapest of the Mag 7 stocks.
1. Cash Rich:Berkshire Hathaway had $168 billion in cash as of Dec 31, 2023. Alphabet had $110 billion as of Mar 31, 2024.
2. Share buyback plans:Berkshire bought back $9.2 billion in 2023 and Alphabet announced an additional $70 billion for 2024.
3. Attractive P/E ratios:Berkshire Hathaway’s forward P/E is 22.1 while Alphabet’s is 23.3.
4. Attractive P/S ratios:Berkshire Hathaway’s P/S ratio is 2.4 while Alphabet’s is 6.4
Old Economy Companies in Berkshire Hathaway: Winners?
How do you value the rest of Berkshire’s portfolio in the companies it owns outright? Tracey looked at some publicly traded competitors for ideas.
1. The Sherwin-Williams Co. (SHW - Free Report)
Sherwin Williams makes paint. Berkshire Hathaway owns competitor Benjamin Moore. Sherwin Williams is not cheap. It’s trading with a forward P/E of 26. In the first quarter, sales at the consumer brand segment fell 7% as fewer homes sold and less remodeling was done.
Sherwin Williams pays a dividend, however, yielding 1%.
2. Masco Corp. (MAS - Free Report)
Masco Corp. also owns a well-known paint brand: Behr paint. But Masco did not see a restoration of volumes in the first quarter. Volumes fell 4%. Masco expects Behr pain to be down slightly in the first half of the year.
Masco is attractively priced, with a forward P/E of 17.8. Masco also pays a dividend, yielding 1.6%.
3. Armstrong World Industries, Inc. (AWI - Free Report)
Armstrong World Industries makes ceiling and wall system solutions in both residential and commercial settings, including in healthcare facilities and classrooms. Berkshire Hathaway also owns several companies that are in similar old school industries like Shaw Industries which makes flooring.
Armstrong World Industries is trading with a forward P/E of 20.3. It also pays a dividend, yielding about 1%. Armstrong World Industries is a Zacks #2 (Buy) stock.
What Else Do You Need to Know About Berkshire Hathaway Being in the Mag 7?
Tune into this week’s podcast to find out.
[In full disclosure, Tracey owns shares of GOOGL in her own personal portfolio.]