Don't Know Your Password?
New to Zacks? Get started here.
Don't Know Your Password?
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating indiv idual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
BAC AAPL CVX KO BRK.B
Trades from $1
You follow Value Investor – edit
You follow Tracey Ryniec – edit
Welcome to Episode #312 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.
With value stocks out performing in 2022, value investing has come back into favor.
And that means the cult of Warren Buffett, and Berkshire Hathaway, is back. At the end of 2022, there was a chart making the rounds on Twitter that compared Cathie Wood’s ARK Innovation performance over the last 5 years with Berkshire Hathaway’s.
As you might have guessed, Berkshire Hathaway is outperforming thanks to ARKK’s terrible 2022. Over the last 5 years, Berkshire Hathaway is up 76.3% while ARKK is down 18.9%.
Meanwhile, many investors are diving into Berkshire Hathaway’s stock in search of safety. Over the last three months, Berkshire’s B shares are up 19.3% versus the S&P 500’s gain of 10.5%.
But is Berkshire Hathaway itself even a value stock?
Should value investors be investing in the stock, and its large holdings?
Is there Value in Berkshire Hathaway?
1. Berkshire Hathaway (BRK.B – Free Report)
Berkshire Hathaway is a large cap holding company that owns dozens of businesses, cash and equity investments. Reminder: it’s not a mutual fund or an ETF fund. It’s a corporation with Warren Buffett as Chairman and CEO.
Berkshire Hathaway trades with a forward P/E of 19, which is more expensive than the S&P 500 and is not in the normal range for most value investors. Tracey usually looks for companies trading under 15.
What about its PEG ratio? Berkshire Hathaway has a PEG of 2.7, which does not indicate value either. A PEG under 1.0 indicates a company has growth and value.
However, Berkshire does have a P/B ratio of 1.5, which is under 3.0, and indicates value.
Is a low P/B ratio enough for value investors or should they wait for a sell-off in the Berkshire Hathaway shares?
2. Apple Corp. (AAPL – Free Report)
Apple is Berkshire’s largest equity holding. It was cheap when Buffett first bought it in 2016, with a forward P/E of around 10.
But in 2023, it is trading at 21x, which is much higher than the S&P 500 which is trading around 18. Apple has a PEG of 1.7.
Additionally, earnings are expected to rise just 1% in fiscal 2023 so there isn’t much growth there either.
Should value investors take a pass on Apple?
3. Bank of America (BAC – Free Report)
Bank of America is Berkshire’s second largest holding, and has been for several years. Warren Buffett has been patient with Bank of America, even while selling many of his other bank stocks.
Shares of Bank of America are down 30% in the last year. It’s cheap with a forward P/E of 9.5. But with banks, investors should also look at P/B ratio. Bank of America’s is 1.15. With banks, a P/B ratio near 1.0 indicates there’s value.
Should investors join Buffett and add Bank of America to their own short list?
4. Chevron Corp. (CVX – Free Report)
Chevron suddenly became the third largest position in Berkshire’s portfolio, at 8%, last year when Buffett went all in on the energy stocks.
Chevron shares surged in 2022, rising 36.9% as energy was the best performing sector for the second year in a row. But it remains cheap as earnings have also risen. Chevron is trading with a forward P/E of just 10.8.
It’s yielding 3.2% now.
Should you follow Buffett into the energy trade, or is it too late to jump into Chevron?
5. The Coca-Cola Company (KO – Free Report)
Coca-Cola has been in the Berkshire portfolio since the first quarter of 2001. Berkshire has held it through the Great Recession and the pandemic. It’s still the fourth largest position in the portfolio.
Coca-Cola shares are up 25% over the last 2 years, versus just 5.4% for the S&P 500.
But shares aren’t cheap. It trades with a forward P/E of 24.4. And Coca-Cola has a PEG ratio of 3.9.
Is Coca-Cola too expensive for value investors in 2023?
What Else Should You Know About Berkshire Hathaway to Start 2023?
Listen to this week’s podcast to find out.
[In full disclosure, Tracey owns BAC in Zacks Value Investor portfolio.]
Bank of America Corporation (BAC) – free report >>
Apple Inc. (AAPL) – free report >>
Chevron Corporation (CVX) – free report >>
CocaCola Company The (KO) – free report >>
Berkshire Hathaway Inc. (BRK.B) – free report >>
Our experts picked 7 Zacks Rank #1 Strong Buy stocks with the best chance to skyrocket within the next 30-90 days.
Recent stocks from this report have soared up to +178.7% in 3 months – this month’s picks could be even better. See our report’s 7 new picks today, absolutely FREE.
This page has not been authorized, sponsored, or otherwise approved or endorsed by the companies represented herein. Each of the company logos represented herein are trademarks of Microsoft Corporation; Dow Jones & Company; Nasdaq, Inc.; Forbes Media, LLC; Investor's Business Daily, Inc.; and Morningstar, Inc.
Copyright 2023 Zacks Investment Research 10 S Riverside Plaza Suite #1600 Chicago, IL 60606
At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +24.48% per year. These returns cover a period from January 1, 1988 through December 5, 2022. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.
Visit Performance Disclosure for information about the performance numbers displayed above.
Visit www.zacksdata.com to get our data and content for your mobile app or website.
Real time prices by BATS. Delayed quotes by Sungard.
NYSE and AMEX data is at least 20 minutes delayed. NASDAQ data is at least 15 minutes delayed.