Valuing Berkshire Hathaway (Q3 2025)

Berkshire Hathaway does not pay dividends; however, it initiates share repurchases when its stock price falls significantly below its intrinsic value—perhaps when the market price drops to around 80% of intrinsic value. This commitment provides a logical floor for Berkshire’s stock price. The next step is to understand how Berkshire measures its own intrinsic value and how much cash it has available for repurchases. Therefore, following Warren Buffett’s recommendation (though perhaps not perfectly precise), we define: Berkshire’s intrinsic value = Fundamental value = Book cash and publicly traded equities + Equity in wholly owned subsidiaries × P/E ratio 1. Since we consider after-tax earnings—and given that U.S. equities are generally trading at high premiums—we adopt a conservative valuation approach and set the P/E ratio at 15. 2. Book cash includes insurance float. Buffett argues that treating insurance float as a liability would underestimate Berkshire’s intrinsic value—see his 2013 letter to shareholders. Calculation Details This valuation is based on Berkshire Hathaway’s Q3 2025 financial statements. From the balance sheet and related tables, Berkshire’s combined holdings of cash and publicly traded stocks total $0.67 trillion. Berkshire’s wholly owned subsidiaries (e.g., insurance, railroads, consumer businesses) are valued at 15× P/E, with their year-to-date after-tax profits annualized by multiplying by 4/3. This yields a valuation of $0.6 trillion. Total intrinsic value: $1.27 trillion. Comparing this figure with Berkshire’s current market capitalization, we derive an intrinsic value of $586 per share for Berkshire Class B stock (BRK.B). Accounting for Berkshire’s typical discount to intrinsic value (due to factors such as the bundled nature of its assets versus piecemeal sale), and incorporating our conservative valuation stance, we apply a 0.9 discount factor—resulting in a fair value of $528 per share for BRK.B.

Business Model Insights: Berkshire Hathaway Inc. (a multinational conglomerate holding company incorporated in the United States)

I. Company Overview 1.1 Summary Berkshire Hathaway Inc. is a multinational conglomerate holding company incorporated in Delaware, USA. It operates a uniquely diversified portfolio built upon the concept of 'franchise businesses'—i.e., companies with strong brands and durable competitive advantages. Its headquarters are located at 3555 Farnam Street, Omaha, Nebraska 68131. In the Fortune Global 500 ranking for 2026, Berkshire ranks 11th (down one spot from 10th in 2025), posting a net profit decline of 24.8% year-on-year—but still achieving an industry-leading 18% net profit margin (net income / revenue) and a 9.8% return on equity (ROE). The company was built over decades by Warren Buffett and Charlie Munger and has become one of the world’s most renowned diversified investment groups. 2025 marks a historic milestone for Berkshire. In May 2025, the Board of Directors appointed Gregory E. Abel to succeed Warren Buffett as Chief Executive Officer, effective January 1, 2026. Buffett will continue serving as Chairman of the Board. The 2025 Annual Report is Abel’s first as designated CEO-elect—and Buffett’s final full fiscal-year report as CEO. As of December 31, 2025, Berkshire and its operating subsidiaries employed approximately 387,800 people worldwide—about 80% in the United States and 19% unionized. The company adheres to an extremely decentralized management philosophy: operating subsidiaries function autonomously, with virtually no centralized or integrated business functions. 1.2 Core Financial Performance in 2025 Financial Metric 2025 2024 YoY Change Total Revenue $371.44 billion $371.43 billion +0.03% Operating Profit $44.49 billion $47.44 billion −6.2% Net Income Attributable to Shareholders $66.97 billion $88.99 billion −24.8% Total Assets $1,222.18 billion $1,153.88 billion +5.9% Shareholders’ Equity $717.42 billion $649.37 billion +10.5% Operating Cash Flow $45.97 billion $30.59 billion +50.3% Cash and Cash Equivalents $373.3 billion $334.2 billion Record High Source: Berkshire Hathaway’s 2025 Form 10-K The 24.8% decline in net income to $66.97 billion was primarily driven by ~$8.3 billion in impairment charges related to investments in Kraft Heinz and Occidental Petroleum. Operating profit declined 6.2% to $44.49 billion. The company’s cash and cash equivalents reached a record $373.3 billion (with a quarterly peak of $381.7 billion).