We recently compiled a list of the ChatGPT Stock Advice: 10 Recent Stock Recommendations. In this article, we are going to take a look at where Berkshire Hathaway Inc. (NYSE:BRK-B) stands against the other stocks recommended by ChatGPT.
ChatGPT has quickly become an essential tool for both professional and personal use, thanks to its human-like responses. Analysts are also exploring its potential for stock picking, using criteria like low P/E ratios to find undervalued stocks. While some question the reliability of ChatGPT for providing accurate and up-to-date information, a study from the University of Florida suggests that ChatGPT can predict stock price movements more accurately than some basic analysis models.
OpenAI recently made a major leap by launching GPT-4o, a new AI model, alongside a desktop version of ChatGPT and an updated user interface. This update brings GPT-4 to all users, including those on the free tier, with enhanced speed and capabilities in text, video, and audio. The “o” in GPT-4o stands for “omni,” indicating its ability to support 50 languages and be available via APIs, allowing developers to start building applications with the new model right away.
The S&P 500 and NASDAQ are on track for their tenth consecutive positive session, driven by the same bullish factors that have propelled the market throughout the year. Inflation continues to trend downward, raising expectations that the Federal Reserve will cut interest rates in September. This potential for rate cuts supports the market by fostering conditions that could lead to a soft economic landing.
Ed Clissold, Ned Davis Research chief U.S. strategist, told CNBC that quarterly earnings growth has consistently accelerated over the past few quarters, with Q2 showing strong results and Q3 expected to follow suit. This steady growth suggests no significant changes in the underlying market thesis, keeping investor sentiment positive.
Despite the recent volatility seen in August, which was partly driven by a spike in market uncertainty and liquidity issues, analysts do not expect this to carry over into September. The possibility of rate cuts by the Fed is providing a solid foundation for the market, though there are some concerns about elevated earnings estimates for Q3 and the upcoming election.
The Dow Jones Industrial Average is close to an all-time high, with stocks like Travelers, Boeing, and 3M leading the charge. Analysts predict a broad market advance, with potential for catch-up in sectors that have lagged behind this year. As interest rates are likely to come down, the market rally could broaden beyond just AI and mega-cap growth stocks.
Looking ahead to next week, key economic data will be in focus, including PCE data on Friday and consumer spending insights on Tuesday. Investors are hoping for “Goldilocks” economic data—not too hot, not too cold—that would confirm the Fed’s rate cut path without signaling an economic downturn. The market favors moderate economic growth, which would support continued stock market gains.
In a world overwhelmed by information, ChatGPT offers a solution for investors. Its natural language processing capabilities allow it to sift through vast amounts of data and provide concise, actionable summaries, helping investors make informed decisions. By reducing information costs and democratizing financial knowledge, ChatGPT is becoming an invaluable tool for individual investors.
Our Methodology
For this article we prompted ChatGPT multiple times to recommend stocks, based on the data as of its knowledge cutoff date. ChatGPT recommended 10 stocks based on “historical trends” and the “market landscape” from various sectors which have “substantial” potential over the next few years. We shortlisted the stocks that were recommended the most and then further selected the ones that were the most widely held by hedge funds. We have sorted these stocks based on the number of hedge fund investors as of Q2 2024.
A team of insurance professionals in a boardroom overlooking a city skyline.
Berkshire Hathaway Inc. (NYSE:BRK-B)
Number of Hedge Fund Holders: 120
Berkshire Hathaway Inc. (NYSE:BRK-B), led by Warren Buffett, is the largest investment holding company globally. While renowned for its adept stock picking, the majority of its revenue—$26 billion of $93 billion in the second quarter—comes from its insurance operations. Beyond insurance, Berkshire Hathaway is highly diversified, with substantial interests in renewable energy, railroads, fuel marketing, energy, industrial and construction manufacturing, and aviation services.
Berkshire Hathaway Inc. (NYSE:BRK-B) has joined the exclusive group of trillion-dollar companies, surpassing a $1 trillion market cap during Wednesday’s trading and closing above that threshold. Notably, Berkshire is the only U.S. company to achieve this milestone without being a technology firm. Instead, it reached this valuation through a portfolio of businesses often considered “boring” by investors.
With the stock now about 40% above its 52-week low and up approximately 135% over the past five years, some may wonder if Berkshire Hathaway Inc. (NYSE:BRK-B) is becoming too expensive.
Berkshire Hathaway holds $277 billion in cash and equivalents, providing it with significant financial flexibility and generating substantial interest income. Excluding this cash from its market value reduces it to $723 billion. Additionally, Berkshire’s stock portfolio is valued at around $318 billion. Removing this value shows that the market is valuing Berkshire’s core operating businesses at $405 billion.
Over the past four quarters, Berkshire Hathaway’s subsidiaries have generated $42.1 billion in operating earnings. When excluding the value of Berkshire’s stock portfolio and cash, the company’s core businesses are trading at roughly 9.5 times their trailing-12-month earnings. Even after removing investment income, Berkshire still reported $30.9 billion in profit, resulting in a price-to-earnings ratio of about 13. This valuation applies to a diverse set of recession-resistant businesses that have seen a 26% increase in operating earnings year-to-date in 2024.
Overall BRK-B ranks 8th on our list of ChatGPT’s recent stock recommendations. While we acknowledge the potential of BRK-B as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BRK-B but that trades at less than 5 times its earnings, heck out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
