Waiting for a Better Price on Berkshire Hathaway? Here's Why You Shouldn't

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Wall Street icon Warren Buffett was trained by an icon of a previous generation, Benjamin Graham. One of Graham's most important concepts wasn't actually about picking stocks, it was about managing emotions. Basically, he explained that you are often your own worst enemy. That's something to consider if you have been thinking about buying the stock of the company Warren Buffett runs, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B). Here's why buying right now might be your best bet.

Warren Buffett provides a warning to investors

Although Warren Buffett doesn't like to talk too much about his investment thoughts, there is one place where he is surprisingly candid about them -- Berkshire Hathaway's annual report. Reading through the decades of annual reports he has penned is probably more valuable than reading most "how to invest" books.

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Warren Buffet.
Image source: The Motley Fool.

In the 2023 report, Buffett made a startling admission: "All in all, we have no possibility of eye-popping performance." The reason for this, as he tells it, is that Berkshire Hathaway is so large -- it has a $980 billion market cap -- that very few companies it could acquire would move the needle.

This suggests that even Buffett thinks that now might be a bad time to buy Berkshire Hathaway stock. If that's the case, shouldn't you listen to the advice of the man dubbed the Oracle of Omaha? Maybe not.

What is Berkshire Hathaway?

At its core, Berkshire Hathaway is a giant, sprawling conglomerate. It is filled with a wide variety of companies that Buffett bought or invested in because they met his investment criteria. To simplify, he prefers good companies that are trading at attractive prices. After buying them, he allows the managers to run them so Berkshire Hathaway can benefit from the long-term growth of the businesses. He gets involved only if he absolutely has to. That makes Berkshire Hathaway something like a mutual fund. And what you are buying when you add the stock to your portfolio is really access to Warren Buffett.

So what Warren Buffett is really telling investors is that there's no chance of "eye-popping performance" given the rich valuation of the market today. It is, perhaps, more a function of what Buffett can find to buy (remember, companies have to be well run and attractively priced) versus the size of the company he runs. What's Buffett doing about it? He's selling stocks to raise cash. That could be read as preparing for a time when valuations are more attractive.