Is Berkshire Hathaway a millionaire?

Berkshire Hathaway (BRK.A 0.83%) (BRK.B 0.81%) is one of the most popular stocks on Wall Street. He has beaten a large number of millionaires over time. However, buying today may not be the best option if you’re hoping it will make you a millionaire too. But don’t write off the stock — CEO Warren Buffett looks set to make some big moves when the time is right.

Berkshire Hathaway is hard to explain

Berkshire Hathaway wouldn’t exist today if it weren’t for the unique investment approach adopted by longtime CEO Warren Buffett. To summarize his methods as simply as possible, he prefers to buy well-run companies while they are out of favor for some reason. This requires patience and access to investment capital. (Keep these two things in mind as you read on.) Over time, he’s built a complex and shockingly diverse conglomerate.

Image source: The Motley Fool.

Today, the S&P 500 the index is trading near all-time highs. This means that companies are generally priced very high in the current environment. It’s hard to find good “on the cheap” companies to buy right now. That’s why Buffett warned in the company’s 2023 annual report:

There are only a handful of companies left in this country capable of really moving the needle at Berkshire, and they have been taken over endlessly by us and others. Some we can cherish; some of us can’t. And if we can, it must be attractively priced. Outside of the US, there are essentially no candidates that are meaningful options for the deployment of capital in Berkshire. All in all, we have no possibility of amazing performance.

Re-read the last sentence: “Overall, we have no possibility of stunning performance.” Buffett is basically warning investors that this is not a million dollar stock right now. However, given Buffett’s investment approach, that’s not exactly surprising either.

The future will be key for Berkshire Hathaway

Investors should not assume, however, that Berkshire Hathaway will never be a millionaire again. The large size of the company is an impediment because it needs to do big business to move the needle. However, at the end of 2023, Berkshire had more than $163 billion in cash and short-term investments on its balance sheet. By the end of the first quarter of 2024, this figure has grown to over $182 billion. And at the end of the second quarter, it was over $271 billion.

In particular, the headlines were filled with news of Buffett selling appreciated stocks such as Apple and, to a lesser extent, Bank of America. As for Apple, Buffett reduced his stake by about 50%, so that was a huge move. Bank of America was “only” a few billion dollars in change. However, much of the cash raised from these sales is likely to find its way onto the balance sheet.

This is where things get interesting, as Buffett has a habit of sitting on cash until he finds something he thinks is worth buying. And he often acts when other investors fear, such as during big market selloffs (he invested in Bank of America during the Great Recession, for example). The fact that he’s building up a hoard of cash while the stock market is near all-time highs likely sets him up for a sizeable move when the next bear market rolls around.

Be patient, like Buffett

If you want to own Berkshire Hathaway in the hopes that it can help you become a millionaire like so many others have, you’ll want to sit on the sidelines right now. Buffett himself tells investors as much. However, it also seems to be gearing up for a time when there are more investment opportunities. It will probably be a difficult time to invest, as Wall Street will be in disarray and the babies will be thrown out with the bath water.

But if you can think like a contrarian, then Berkshire Hathaway will probably have the biggest opportunity to take you to seven figures. First, the stock will likely be cheaper, and second, that’s when Berkshire Hathaway will have its best opportunity to put its cash hoard to work.