Berkshire Hathaway Stock Price Forecast January 2022 – Time to Buy BRK.B Stock?

Berkshire Hathaway (NYSE: BRK.B) stock gained 29% in 2021 and slightly outperformed the S&P 500. It was nonetheless a welcome break for investors as the stock underperformed the markets by a wide margin in 2019 and 2020.

The stock has started 2022 on a positive note and is outperforming the markets. What’s the forecast for Berkshire Hathaway stock and can it continue to outperform the markets in 2022?

Berkshire Hathaway stock has underperformed

berkshire hathaway stock has underperformed

Meanwhile, looking at the performance over the last decade, Berkshire Hathaway has underperformed the markets. This has mainly been because of two reasons. Firstly, tech stocks have led the markets higher over the period, and barring Apple, Berkshire does not have much exposure to tech companies.

Secondly, value stocks have generally underperformed over the last decade as growth stocks were the flavor of the season. Meanwhile, in 2021, we saw a pivot towards value stocks and the trend might continue in 2022 as well, as the Fed embarks on rate hikes.

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How to understand Berkshire Hathaway?

Berkshire Hathaway is a conglomerate and it can be tough to understand the business. In his 2018 annual letter, the company’s chairman and legendary value investor Warren Buffett beautifully explained the business and termed it a “forest” with “five groves.” One grove is of course the insurance business, which is among the largest insurance companies in America. However, what makes the business special is the float that it generates which then Buffett invests in other companies.

Warren Buffett on the five groves

The second grove is the multiple noninsurance businesses that Berkshire Hathaway owns. To be sure, it’s quite a diversified business that includes companies as diverse as candy makers to aircraft component makers. Buffett termed it the most valuable grove for the company.

Berkshire Hathaway’s portfolio of publicly traded companies is another key grove. Thanks to the rise in US stocks over the last decade, this grove has grown at a brisk pace. Apple is the biggest holding for Berkshire followed by Bank of America. The portfolio value stands at around $348 billion which is nearly half of the company’s $700 billion market cap.

Buffett termed the companies where it holds a significant stake, like Kraft Heinz, where it owns a majority stake as another grove. The final grove is the massive investments in treasury bills. This is a proxy for the cash on Berkshire’s balance sheet. Despite Buffett spending generously on buybacks, the cash pile soared to almost $150 billion at the end of the third quarter of 2021.

What makes Apple so special

Apple has turned out to be the best investment that Buffett ever made, at least in absolute terms. The conglomerate holds a 5.5% stake in Apple which makes it the second-largest stockholder.  The company’s stake in Apple has actually increased despite Buffett selling around $11 billion stake. This is because of the massive buybacks pursued by Apple.

BRK.B stock forecast

Despite it being a $700 billion company, Berkshire Hathaway is not very popular among analysts and only seven analysts cover the stock. Of these two have a buy rating while five have a hold rating. The stock’s median target price of $327 is a premium of only about 4.5% from these levels.

Key risks that Berkshire Hathaway faces

There are a couple of risks that Berkshire Hathaway faces. The first one is on the succession plan after Buffett and Munger. While Greg Abel is expected to succeed Buffett, he has really big boots to fill. The short-term underperformance notwithstanding, Buffett has beaten the markets by a wide margin since 1965. Also, Berkshire would need to pay massive taxes if it were to offload its stake in different companies.

BRK.B is a play on the US economy

Thanks to its diversified portfolio, Berkshire Hathaway stock is a play on the US economy, just like the S&P 500. It is present in several cyclical industries including energy and railroads both of which are benefiting from the recovery in the US economy.


Over the last couple of years, the company has scaled up the buybacks and repurchased $24.7 billion of its shares in 2020. Notably, the conglomerate had changed its buyback policy to a quantitative approach that gave Buffett a free hand. Previously, it repurchased shares only when the stock price was up to 120% of the book value.

In the first nine months of 2021, it repurchased $20.2 billion worth of its stock. At the same time, Buffett has been a net seller of stocks for four quarters. This has added to its cash pile. The company also earns billions every year from the multiple subsidiaries as well as the dividends from investee companies.

Should you buy BRK.B stock?

Buying BRK.B is like betting on Buffett’s expertise. The Oracle of Omaha hasn’t been able to find good acquisition opportunities as the market valuations are not what a value investor like him might like. However, given the expected increase in interest rates, value stocks might continue to outperform in the medium term which bodes well for BRK.B stock.

Meyer Shields, an analyst at Keefe, Bruyette & Wood believes that investors see Berkshire Hathaway as a cyclical stock. “You’ve got the (positive) double-whammy of positive equity market performance boosting both its book value and its price-to-book multiple. Just about all of its insurance businesses are working, and most of its businesses are now raising prices,” said Shields. Josh Brown, CEO of Ritholtz Wealth Management also believes that Berkshire looks like a perfect stock to buy now.

Given the elevated broader market valuations and the continued pivot towards value stocks, Berkshire Hathaway looks among the best stocks to buy, especially if you are a defensive investor looking to outperform the market.

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Mohit Oberoi is a freelance finance writer based in India. He has completed his MBA with finance as majors and also holds a CFA charter. He has over 14 years of experience in financial markets. He has been writing extensively on global markets for the last seven years and has written over 7,500 articles. He covers metals, electric vehicles, asset managers, tech stocks, and other macroeconomic news. He also loves writing on personal finance and topics related to valuation.