Berkshire Hathaway Inc. (BRK.A) (BRK.B): The One Stock You Should Own

In the case of each of Berkshire’s large investments, the companies were selected based on a thorough understanding of the business and risks facing both the companies and the greater industry. When the financial crisis caused the downfall of a number of well-known institutions that took too many risks, American Express and Wells Fargo survived and in fact exited the crisis even stronger. Meanwhile, Berkshire’s management did not panic when the share prices of each company briefly collapsed; instead, the company held shares in both companies through the short-term noise while many panicked.

Buffett has put a floor on Berkshire’s share price

In addition to all of the reasons noted above that Berkshire is a superior way to gain diversity in a portfolio, management has added another. The company recently established a share repurchase program, which was subsequently updated to be triggered once the share price falls to 1.2x the company’s book value. This “floor” provides significant downside protection to investors, while also further expressing management’s confidence in the health of the company. For reference, 1.2x book value based on the most recently available information translates into a share price of around $89. This makes the recent 52-week high around $99 per share a very reasonable price in terms of current valuation, and a compelling buy considering all of the reasons that the company continues to succeed.

Berkshire is a Top 10 stock

In total, the reasons to invest in Berkshire Hathaway discussed above are a unique combination that can’t be found in any other single company. The diverse, well-run businesses are massively successful, and there’s no reason to doubt that Berkshire’s historical trend of market beating returns with below average risk will continue for the foreseeable future. While the pace of this market out-performance won’t be as great as the early days of Berkshire’s historic rise, there should still be a place for this type of risk/reward profile in any portfolio. For this reason, Berkshire joins a stellar group of companies in the top 10 stocks:

1. Apple
2. Diageo
3. Coca-Cola
4. Chipotle Mexican Grill
5. Costco Wholesale
6. 3D Systems
7. Canadian National Railway
8. National Oilwell Varco
9. Berkshire Hathaway
   One more stock to go!

The article The One Stock You Should Own originally appeared on Fool.com and is written by Brian Shaw.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.