We recently published a list of 10 Best Stocks to Buy for the Long-Term According to Charles Akre. In this article, we are going to take a look at where Berkshire Hathaway Inc. (NYSE:BRK-A) stands against other best stocks to buy for the long-term according to Charles Akre.
“Above-average returns at below-average risk” is the mantra that defines Charles Akre, one of the most successful asset managers on Wall Street. As the founder of Akre Capital Management, he is a celebrated value-oriented investor. He is best known as a collector of great business, which he has invested in for many years to generate optimum value.
His dedication to long-term planning and systematic valuation has consistently yielded exceptional results. Akre’s investment portfolio has generated more than 300% returns over the past ten years.
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He has become one of the most successful investors focusing on an investment philosophy dubbed the “three-legged stool” approach. The investment approach advocates for examining business models’ rates of return and reinvestment opportunities before investing. Likewise, Akre advocates investing in companies with enduring competitive advantages, robust balance sheets, and long-term earnings growth prospects.
Unlike most investors focusing on market trends, Akre’s philosophy focuses on finding companies trading at fair value. By avoiding popular stocks, the value investor has succeeded in concentrating on cheap opportunities that most investors often overlook. He also adopts a strategic approach that goes beyond buying and holding stock for the long term.
Instead, Akre consistently evaluates the core business strengths and fundamental aspects of companies. His focus on “outstanding businesses” indicates that he has carefully considered factors like competitive advantage, growth potential, and top-notch management. Consequently, the best stocks to buy for the long term, according to Charles Akre, are companies well poised to navigate short-term market fluctuations. Similarly, they are companies that capitalize on long-term compounding effects.
In contrast to passive index investing, Akre’s approach necessitates active monitoring of a company’s performance to ensure that it maintains the standards of an exceptional business. Having a thorough understanding of the management team, business operations, and industry dynamics is also essential.
The value investor also advocates for diversification as one of the ways of spreading the risk and shrugging off market volatility. Therefore, Akre Capital Management’s portfolio is spread across technology, financial services and other sectors. While the overall market has been trending over the past year, resulting in overstretched valuations, Akre believes there is still value to unlock. Nevertheless, he expects the financial markets to remain volatile.
“…The US stock market and quite likely the markets of Western Europe can continue to be very volatile as they respond to good news and bad news, which will pop up on a regular basis. From my perspective, this is actually good news-that kind of volatility will increasingly give us opportunities periodically… Therefore, markets can go up even when economic activity has not picked up. But my expectation is a fair amount of volatility for some time,” said Charles Akre.
Our Methodology
To compile our selection of the best stocks to buy for the long-term, according to Charles Akre, we began by analyzing Akre Capital Management’s 13F portfolio and chose to highlight the stock holdings that have remained within the portfolio for at least 5 years. Next, we assessed the number of hedge fund investors associated with each stock as of the end of the third quarter of this year. Finally, the stocks were ranked in ascending order based on the value of Charles Akre’s stakes in the companies.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A team of insurance professionals in a boardroom overlooking a city skyline.
Berkshire Hathaway Inc. (NYSE:BRK-A)
Akre Capital Management’s First Major Purchase: 2010
Akre Capital Management’s stake value: $7.03 million
Number of Hedge fund holders as of Q3: 120
Berkshire Hathaway Inc. (NYSE:BRK-A) is a financial services company that deals with insurance, freight rail transportation, and utility businesses. Given its track record in identifying and investing in exceptional companies with consistent returns, it is one of the best stocks to hold for the long term. The firm has delivered an average annual return of 20% since 1965.
The investment company also stands out owing to the diversified nature of its portfolio. Berkshire Hathaway Inc. (NYSE:BRK-A) invests in nearly 70 companies. Some of the holdings that account for a significant chunk of the firm’s revenue include railroad operator BNSF, insurer Geico, and energy company Berkshire Hathaway Energy. Other outstanding holdings include Apple, American Express, and Bank of America.
In addition, Berkshire Hathaway Inc. (NYSE:BRK-A) stands out owing to its cash haul, which it returns to shareholders through buybacks. After slashing holdings in some high-profile names like Apple, the firm had a record $325.2 billion as of November. The huge free cash in the balance sheet also leaves the investment firm in a solid financial position to invest in new opportunities.
In the third quarter of 2024, Berkshire Hathaway Inc. (NYSE:BRK-A)’s revenues slipped 0.2% year over year to $93 billion. The decline came amid lower revenues in the Insurance segment. Operating earnings were also down 6.2% to $10.1 billion.
Overall, BRK-A ranks 10th on our list of best stocks to buy for the long-term according to Charles Akre. While we acknowledge the potential of BRK-A to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BRK-A but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.