Berkshire Hathaway trading at 1.3 times its book value

Warren Buffett and Berkshire Hathaway released the company’s annual report last weekend. The report shows that the company’s A shares (NYSE:BRK-A) are trading at about 1.3 times the amount of Berkshire Hathaway’s end of 2015 book value, making them potentially attractive for investors. The end-of-the-year book value for the company was at $155,501, while the shares are currently trading at $208,250 as of 10 a.m. on March 7. Mr. Buffett has previously stated that he would be willing to repurchase shares if they trade at 1.2 times the company’s book value, which many people consider to be the absolute floor.

Extraordinary Performance Over Buffet’s Tenure

In Warren Buffett’s 2014 shareholder letter, the company’s historical returns were astounding. Under his leadership for more than half a century, Berkshire Hathaway’s stock values have increased by an average of 21.6 percent compounded annually or a total percentage increase of 1,826,163%. If the company continues to be managed in the same manner, then the trend is likely to continue.

Potential Risks

One potential risk for purchasing shares of Berkshire Hathaway is the fact that Warren Buffett is now 85-years-old. The risk is about knowing who would succeed him at the company and how the successor would impact the company’s value and resulting share price. Andrew Bary believes that the risk of succession is most likely factored in to the company’s current stock value. The company also is dealing with the weakened energy market and fewer coal shipments. Mr. Bary believes the likely successor to Mr. Buffett will be Greg Abel, who currently is the company’s energy chairman.

Conclusion: Excellent Chance To Buy

At its current trading per share price, it appears that Berkshire Hathaway is undervalued. This makes it a potentially good opportunity for investors as the company has historically shown terrific growth and returns. Shares of Berkshire Hathaway are ones that people should hold on to as the history demonstrates strong growth in stock value over time. Even with succession risks and the weakened energy market, we recommend that investors buy shares in the company now.