Is It Too Late to Buy Berkshire Hathaway Stock Now?

As one of the most famous investors in the world, Warren Buffett has amassed a huge following. So it's not surprising that Berkshire Hathaway 's (NYSE: BRK.A) (NYSE: BRK.B) stock is a popular holding among investors. After all, the conglomerate is also home to Buffett's famed investment portfolio.

Berkshire has long been associated with insurance companies , as Buffett likes to use the float that the industry generates to make his investments. The float is simply money that insurance companies hold that has yet to be paid out in claims.

Berkshire owns a number of insurance companies, including Geico and General Re. However, it also has a plethora of wholly-owned businesses in a variety of sectors, from railroad operator BNSF to underwear maker Fruit of the Loom.

Berkshire stock has been a winner this year, up over 25% year to date, and sits near all-time highs. Is it too late to buy?

Valuation

One of the most popular metrics for valuing insurance businesses is the price-to-book (P/B) metric. However, Berkshire is much more than insurance nowadays, so price-to-earnings (P/E) is another option. In either case, the stock is trading higher than it usually has.

BRK.B Price to Book Value data by YCharts

For his part, Buffett previously used the P/B metric to determine if Berkshire should be buying back its shares. He used to repurchase shares only when the stock was trading below 1.1 times book, then when it was trading below 1.2 times. Later he renounced that policy. He has also stated that he does not think P/B and P/E are great metrics for a company's intrinsic value.

Nonetheless, the stock is trading at higher price-to-book multiples compared to the past few years.

Image source: Getty Images.

Buffett won't be around forever

With Buffett about to celebrate his 94th birthday at the end of August, it's quite likely he won't be running Berkshire in a decade. However, the company has a succession plan firmly in place.

Vice Chairman Ajit Jain will run Berkshire's insurance operations when Buffett is gone, while Greg Abel will be responsible for all investment and capital allocation decisions. Abel currently oversees Berkshire's non-insurance businesses.

Both executives took direct responsibility for their roles about five years ago, so the transition with Berkshire's owned businesses should be quite smooth. In fact, Abel is known to be tougher on many of the bosses running Berkshire's individual businesses than Buffett or his former right-hand man Charlie Munger were.

What Abel hasn't been, though, is a stock picker. However, Buffett has said that Abel's understanding of business should translate into investment skill. The company also has Todd Combs and Ted Weschler, who have been helping manage Berkshire's investment portfolio for more than a decade.

When Buffett does eventually pass, it wouldn't be surprising to see the stock react negatively. Buffett, for his part, has said he expects the stock to rise in value on the possibility of a breakup of the conglomerate and that its individual businesses are worth more than the whole. That may be wishful thinking, although how much of a Buffett premium is built into Berkshire's stock is unknown given that his death wouldn't exactly come as a surprise.

Is it too late to buy Berkshire stock?

Given Berkshire's current valuation and the advanced age of Buffett, I wouldn't be running out to buy the stock after its more-than-25% gain this year. That said, I think Buffett built the company to outlast him and that it will continue to be well run after he is gone.

Berkshire has been a winner for a long time, and I expect that to continue as well. I'd just prefer to wait for a pullback to be a buyer.

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy .