Led by Warren Buffett Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRC.B) It is known to contain large quantities Shares in common stocks like apple, American Express, Bank of America, coca colaand Chevron. But the bulk of Berkshire’s value comes from its other assets, which include insurance companies, railroad company BNSF, energy company Berkshire Hathaway, and a large number of retail, service and manufacturing companies.
Exchange-traded funds Berkshire Hathaway’s ETFs provide a way to capitalize on Buffett’s investment empire while maintaining diversification. Berkshire Hathaway shares are holdings in several funds, including low-cost ETFs offered by investment management firm Vanguard.
Here are five Vanguard ETFs with exposure to Berkshire that might be worth buying now. But first, here’s a look at why Berkshire is in a unique position heading into the new year.
In August, Berkshire became the first non-technology company to reach $1 trillion in market capitalization. But Berkshire has had a volatile few months since then, with a market capitalization of $977 billion at the time of this writing.
It’s been a uniquely contradictory year for Berkshire. Buffett has sent several warning signals to investors by trimming positions or selling and raising money — suggesting that Buffett and his team may view the broader market as generally overvalued.
The warning signs have become louder in recent months, as Berkshire did not buy back its own stock during the quarter for the first time since the third quarter of 2018. Berkshire’s net cash position is at a record high, and its net stock sales for the year so far during the September quarter are All-time highs.
On paper, Berkshire is arguably the most pessimistic of all. But that doesn’t mean buying the company is a bad idea. To begin with, $325 billion in cash and Treasury bills essentially means that roughly a third of Berkshire’s value is in cash. The total value of Berkshire’s public stock holdings does not exceed $300 billion, so the rest of the company’s value is in other assets, such as insurance companies, railroads, and other companies mentioned previously.
Berkshire is a stable company with many advantages in today’s relatively expensive market. They contain the dry powder needed to load up on stocks or make acquisitions when they feel the valuations make sense. Their businesses are stable cash cows that tend to grow gradually over time. It’s not the type of company that can achieve explosive growth, but it also has what it takes to withstand an economic slowdown.
Some investors may want to buy Berkshire Hathaway stock instead of ETFs because it is already a fairly diversified company. However, investors who want to pair Berkshire with other stocks may want to look at the following funds more closely.
Given its size, Berkshire makes up a large share of the financial sector. They also tend to be included in value-focused funds. However, Berkshire is excluded from income-oriented funds because it does not pay dividends.
Buffett prefers to use excess capital to buy back stocks rather than pay dividends because it creates more value for long-term investors. Given Berkshire’s historical returns, Buffett was largely correct in his decision not to pay dividends on Berkshire stock.
|
European Training Foundation |
Berkshire Hathaway Fund Percentage (Class A and Class B Shares) |
Collectibles |
Expense ratio |
|---|---|---|---|
|
Vanguard Financial ETF (NYSEMKT:VFH) |
7.7% |
409 |
0.1% |
|
Vanguard Mega Cap Value ETF (NYSE: MGV) |
4.5% |
136 |
0.07% |
|
Vanguard S&P 500 Value ETF (NYSEMKT: VOOV) |
4% |
437 |
0.1% |
|
Vanguard Value ETF (NYSEMKT:VTV) |
3.9% |
335 |
0.04% |
|
Vanguard S&P 500 ETF (NYSEMKT: flight) |
1.7% |
504 |
0.03% |
Data source: Vanguard. Chart by author.
The Vanguard Financials ETF is a low-cost way to reflect the performance of the financial sector. The fund has exposure to the largest diversified banks such as JPMorgan ChasePayment processors such as VisaInsurance companies, and more.
The Vanguard Mega Cap Value ETF, S&P 500 Value ETF, and Value ETF are all similar funds. The Mega Cap Value ETF focuses a little more on the largest companies, which is why it has a slightly higher weighting in Berkshire than other value-focused funds.
The best fund for you depends on how much diversification you want. The Vanguard Value ETF has the lowest expense ratio of value-focused funds at just 0.04%.
The fifth fund on the list is the Vanguard Fund Standard & Poor’s 500 Index fund. With net assets of $1.37 trillion, the fund represents low-cost investing at scale. The size of the fund allows it to charge an expense ratio of just 0.03%, or just $3 for every $10,000 invested.
Berkshire is one of the fund’s largest holdings, but the sheer size of companies like Apple, Microsoftand Nvidia Meaning that even a company with a market cap worth nearly a trillion dollars like Berkshire can’t even crack 2% of the fund. This shows how overweight the S&P 500 is, as well as how much its value has worsened over time.
Investing in ETFs can be an excellent and practical way to put new capital to work in the stock market. By selecting ETFs that contain stocks you like, you can achieve diversification while also investing in companies you understand and believe in.
You could also consider a hybrid approach by buying Berkshire Hathaway stocks and ETFs. This way, you can get significant exposure to Berkshire while still bringing it closer to dozens, if not hundreds, of other major companies.
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Bank of America is an advertising partner of Motley Fool Money. American Express is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Daniel Fulber He has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends positions in and recommends Apple, Bank of America, Berkshire Hathaway, Chevron, JPMorgan Chase, Microsoft, Nvidia, Vanguard Index Funds-Vanguard Value ETF, Visa, and the S&P 500 ETF. The Motley Fool recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has Disclosure policy.
Do you want to buy shares of Warren Buffett’s investment empire before the end of 2024? Consider Berkshire Hathaway’s five great ETFs. Originally published by The Motley Fool