3 Top Reasons I Plan to Hold Berkshire Hathaway Stock Forever (And Warren Buffett Isn’t One of Them)

Warren Buffett famously said that his favorite holding time is “forever.” I bought into this mindset. I almost never sell stocks.

So it should come as no surprise that I’m not going to do it ever sell my shares in Buffett’s company, Berkshire Hathaway (BRK.A 1.34%) (BRK.B 1.35%). While its presence plays a role, it’s not one of the top three reasons I plan to own stocks for the rest of my life. Here’s why Berkshire Hathaway it’s a forever stock for me.

1. Massive cash position

Berkshire Hathaway is a financial powerhouse. The company ended the second quarter with $277 billion of cash on its balance sheet. This was a significant increase from her previous record cash balance of $189 billion at the end of the first quarter. Berkshire has boosted its cash balance through its strong operating cash flow and the sale of shares, including nearly half of its stake in the tech giant Apple.

Buffett and his management team would love to use that money in compelling investment opportunities. However, it doesn’t burn a hole in their pocket. At the company’s annual meeting in May, Buffett told investors: “We won’t spend it unless we think (a business) is doing something that very little risk and can make us a lot of money.“ At the moment, “things are not attractive.“

I like this discipline. It will allow Berkshire to strike when the right opportunity comes. This should allow it to create more value for investors over the long term than if it were to make an acquisition only to do something when the valuations are less attractive.

2. Exploitation businesses that gush cash

Berkshire Hathaway has a diversified portfolio of wholly owned operating businesses. The company has insurance operations (including GEICO), BNSF Railway, Berkshire Hathaway Energy and a number of other companies, including various manufacturing, service and retail operations. Berkshire is hiring strong, independent management teams for each business to develop its operations.

The company’s operating businesses are generating strong and growing earnings. Berkshire’s operating profit was $11.6 billion in the second quarter, up 15% from a year earlier. The conglomerate keeps 100% of its earnings, which it uses to increase shareholder value by buying back its shares, acquiring additional operating businesses and buying shares in its investment portfolio. The company has an excellent track record of reinvesting the retained earnings of its operating companies to earn more money for its shareholders.

3. High quality investment portfolio

Warren Buffett and his management team use a portion of the company’s retained earnings to invest in publicly traded companies. Its equity portfolio currently totals more than $315 billion, which is about a third of the company’s stock market capitalization. Notable investments include Apple (28.7% of its investment portfolio), American Express (12.2% of its investment portfolio and 21.3% of the credit giant’s outstanding shares), and Occidental Petroleum (4.6% of the portfolio and 27.9% of the oil company’s outstanding shares).

Berkshire Hathaway’s investment portfolio provides it with dividend income, a source of liquidity (it can sell shares to raise cash) and potential growth from stock price appreciation. Buffett and his team have done an excellent job of identification undervalued stocks with attractiveness total return potential. i think Buffett’s team can continue to identify great investment opportunities long after he’s gone. These investments should allow the company to grow more value for shareholders than if Berkshire returned that money to them through dividends or additional buybacks.

A great stock forever

Berkshire Hathaway is a great company. Warren Buffett and his team have built a strong portfolio of operating businesses that generate growing earnings that the company retains to enhance shareholder value. Buffett’s team does this by acquiring other operating businesses and investing in publicly traded companies. The company at present it has a massive pile of cash, giving it plenty of cash to grow shareholder value when the right opportunities arise. These high quality features are why I plan to own Berkshire Hathaway stock for the rest of my life.