Berkshire Hathaway Inc. is an American multinational conglomerate holding company headquartered in Omaha, Nebraska, United States. According to the Forbes Global 2000 list and formula, Berkshire Hathaway is the eighth-largest public company in the world, the tenth-largest conglomerate by revenue and the largest financial services company by revenue in the world. Berkshire Hathaway is famously controlled and led by Warren Buffett and Charlie Munger, and the company wholly owns many major brands including GEICO, Duracell, Dairy Queen, BNSF, Lubrizol, Fruit of the Loom, Helzberg Diamonds, Long & Foster, FlightSafety International, Pampered Chef, Forest River, and NetJets, and holds significant interests in many other major companies.
Your Assignment:
Berkshire Hathaway famously has the most expensive share price in history with Class A shares costing around $430,250 each. You are a financial advisor and a client has asked you for your thoughts on Berkshire Hathaway as they are considering including this holding in their investment portfolio. Your client has $2 Million to allocate to their equity holdings so this investment would represent almost 25% of their overall equity exposure. They need to understand the risk/reward profile of this investment relative to their other equity holdings before making this investment.
Discuss whether an investment at this price could be justified. How do the themes in the Berkshire Hathaway letter relate to the investment themes that we have discussed this semester? Based on Berkshire’s business model and risk profile, is it worth an investment into Berkshire Hathaway at the current stock price?
In order to make an appropriate recommendation, familiarize yourself with the company by reading Berkshire Hathaway’s most recent shareholder letter, keeping in mind the themes that we have discussed this semester. You may use outside sources to support your arguments, making sure that you cite all references using an acceptable convention (APA or MLA format, 2-4 pages double-spaced not including references or tables).