When it comes to investing, putting all your money into one stock is risky, as it exposes your entire portfolio to the performance of a single company. To reduce the impact of volatility, having a well-diversified portfolio is recommended, with The Motley Fool suggesting at least 25 stocks.
With that said, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), a $1.1 trillion holding company, could be considered the exception to the rule due to its mixture of wholly owned companies, stocks, and a $334 billion cash pile. So, let's dive into why the company has excelled and what lies ahead.
A history of outperformance
Since taking the helm of Berkshire Hathaway in 1965, Warren Buffett has delivered a compound annual gain of 19.9%, nearly doubling the market benchmark S&P 500's total return of 10.4% through 2024. Furthermore, amid market turmoil in 2025, Berkshire's stock is up almost 17% compared to the S&P 500's decline of 8%.
When Buffett purchased a majority ownership stake in Berkshire (a struggling textile company in 1965), his primary investing philosophy was what he dubbed "cigar butt investing." It involved buying beaten down companies on the cheap that he believed still had a puff of profit remaining. However, over time, Buffett adopted longtime business partner Charlie Munger's investing philosophy of buying "wonderful businesses purchased at fair prices."
Today, Berkshire has 189 operating businesses under its banner, including the likes of BNSF Railway and Dairy Queen. But its stake in the insurance giant GEICO, which it has owned outright since 1996, has been the difference maker.
That's because, as a property/casualty insurer, the company receives premiums up front called the "float," which Berkshire can invest until the policyholders' claims deplete it. Over the past two decades, Berkshire's float has grown from $46 billion to $171 billion.
Between Berkshire's operating earnings (which topped $47.4 billion in 2024) and its float, the company has amassed a portfolio of stocks worth approximately $270 billion and a cash pile of $334 billion.
Why Berkshire Hathaway is poised to benefit in a recession
That cash pile is the most glaring reason why Berkshire stands to benefit in a recession. Currently, Buffett is placing the lion's share of that cash in Treasury bills -- a debt instrument backed by the U.S. government, maturing in one year or less -- which currently yield between 4% and 4.3%.
Considering the highly liquid nature of Treasury bills, Buffett could quickly deploy a large portion of the $334 billion into the stock market. As previously mentioned, the S&P 500 has been down 8% year to date, and tariff anxiety could deepen clearance sales even further over the coming months.
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Buffett has been in this position in the past, most notably during the financial crisis when he prudently invested $5 billion in preferred stock issued by Bank of America in 2011 and converted those warrants in 2017 for a $15 billion profit.
Buffett has consistently stated that he will never let Berkshire float fall below $30 billion, but that still leaves plenty of cash for the Oracle of Omaha to deploy.
As for which stocks Berkshire may scoop up, look no further than its portfolio of stocks. Buffett wrote in his 2018 letter to shareholders: "In the years ahead, we hope to move much of our excess liquidity into businesses that Berkshire will permanently own. The immediate prospects for that, however, are not good: Prices are sky-high for businesses possessing decent long-term prospects." While some of its major holdings, like Apple, Bank of America, and Coca-Cola would be out of the question due to their high enterprise values, others like DaVita, Kraft-Heinz, and Sirius XM could be in play.
Is Berkshire Hathaway stock a buy, hold, or sell?
Before buying any stock, an investor should check its valuation to see if it's overpriced, underpriced, or fairly valued. Given Berkshire's diverse businesses and holdings, it can be challenging to value the company based on traditional metrics like price-to-earnings and price-to-book ratios.
However, one clue that Berkshire stock may be overvalued is that Buffett hasn't repurchased any of the company's stock since mid-2024. Buffett repurchased approximately 12% of Berkshire's outstanding shares in the five preceding years.
Nonetheless, in a tumultuous market, Berkshire's $334 billion cash pile partially limits the stocks' downside while providing an opportunity for significant growth if Buffett capitalizes on depressed prices and the market eventually turns around. For that reason, Berkshire stock remains a buy for long-term investors.
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Bank of America is an advertising partner of Motley Fool Money. Collin Brantmeyer has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Bank of America and Berkshire Hathaway. The Motley Fool recommends Kraft Heinz. The Motley Fool has a disclosure policy.
