Hook & thesis
Warren Buffett's departure is a story headline, not an immediate balance-sheet shock. Berkshire Hathaway's core strengths - the insurance float engine, a diversified operating base (rail, utilities, manufacturing, retail) and substantial equity capital - don't evaporate overnight. That's why I'm still bullish: the company generates predictable operating cash flow, has scale advantages in deal sourcing, and a management team that has already shown an appetite for portfolio rebalancing.
My trade idea is actionable: look to accumulate BRK.A on weakness with a well-defined entry range, a tight stop expressed as a percentage of entry, and staged upside targets. The fundamental backdrop gives us a healthy margin of safety even as headline risk remains elevated during the post-Buffett transition.
What Berkshire actually is - and why the market should care
Berkshire is a decentralized conglomerate anchored by insurance operations (Geico, Berkshire Hathaway Reinsurance Group, Primary Group) that provide low-cost float. That float has historically funded acquisitions like Burlington Northern Santa Fe (rail), Berkshire Hathaway Energy (utilities), and a wide array of manufacturing, services and retail assets (Precision Castparts, Lubrizol, Clayton Homes, Marmon, IMC/ISCAR). The company description indicates management expects roughly $375 billion in revenue in 2025, illustrating the sheer scale of the enterprise.
Why this matters: insurance float is both a funding mechanism and a capital lever. When underwriting is disciplined, float lowers Berkshire's overall cost of capital and creates optionality for opportunistic buyouts. The company’s decentralized structure also reduces execution risk on day-to-day operations while leaving capital allocation decisions at the center - the critical lever for shareholder returns.
Recent performance - the numbers that support holding/adding
Pick the clean figures and they support a steady, cash-generative enterprise. Key line items from the most recent quarter (Q3 fiscal 2025, period 07/01/2025 - 09/30/2025; filing date 11/03/2025):
- Revenues: $94,972,000,000 for Q3 (07/01/2025 - 09/30/2025).
- Net income: $30,864,000,000 for the same quarter; net income attributable to parent $30,796,000,000.
- Operating income: $15,836,000,000.
- Operating cash flow: $13,789,000,000 (net cash flow from operating activities, continuing).
- Investing cash flow: net outflow of $39,052,000,000 in the quarter - consistent with active portfolio and acquisition activity.
- Balance sheet scale: Assets of $1,225,963,000,000; equity of $700,441,000,000; liabilities of $525,522,000,000.
Interpretation: the company is large, profitable and free-cash-generative at the operating level. Q2 and Q3 cash flow patterns show management actively redeploying capital (Q2 shows significant investing inflows/outflows tied to portfolio moves), which is exactly the optionality shareholders buy into with Berkshire.
Valuation framing
The dataset does not include a market cap figure, but the market snapshot shows a last trade price for BRK.A at $747,020 (last trade p=747020.0012). The 12-month daily price history ranges roughly from a low near $663k to highs above $809k, indicating the current price sits near the mid-to-upper end of that range.
Given Berkshire’s conglomerate nature, simple multiples can be misleading: a portion of earnings is insurance underwriting (low capital requirement per unit of earnings), another portion is long-lived industrial cash flow, and the rest is investment gains/losses tied to public markets. With equity of ~ $700B on the balance sheet and recurring operating cash flow, the company feels like a franchise priced for steady compounding rather than high short-term growth.
Bottom line: valuation should be judged on capital allocation optionality and balance-sheet resilience more than a single P/E. Current price sits near recent highs, so buying on a pullback is prudent.
Trade idea (actionable)
Thesis: long Berkshire (BRK.A) on weakness into a disciplined position. Entry, stop and targets below assume use of BRK.A shares at the market’s nominal price.
- Trade direction: Long BRK.A
- Entry: 720,000 - 747,000. Primary size at the lower half of this range; accumulate up to the top of the range if momentum recovers.
- Stop: 5.5% below your average entry (round to cash value). Example: if you enter at 740,000, stop = 740,000 * 0.945 = ~700,000.
- Targets:
- Target 1 (near-term, 6-12 months): 820,000 - take 50% of position off.
- Target 2 (ambitious, 12-24 months): 900,000 - sell remaining half or scale to smaller trim sizes as goals are met.
- Position sizing / risk framing: treat BRK.A as a core position but size based on the illiquidity and large nominal share price. Use the 5.5% stop to limit downside and avoid concentration risk: no more than 5-7% of overall portfolio value in BRK.A at full allocation.
Catalysts to push the stock higher
- Active capital allocation - management continues to redeploy insurance float into high-return acquisitions or buybacks. Q3 investing outflows show the company is not hoarding cash.
- Portfolio rebalancing - media reports indicate sales of large positions (examples in the news include sales of Apple stock and buying other names), which can crystallize gains and reallocate to higher-return opportunities.
- Possible shareholder-friendly moves - speculation around dividend initiation or more aggressive repurchase programs is a recurring catalyst (market commentary in early January 2026). If management signals clearer return-of-capital plans, the multiple could expand.
- Insurance pricing cycle - if underwriting stabilizes and pricing normalizes, float economics improve and underwriting volatility falls, supporting multiple expansion.
Risks & counterarguments
I list at least four concrete risks below and include a short counterargument to my bullish stance so you get a balanced view.
- Leadership transition risk: the departure of an icon invites scrutiny. Even with a capable successor, capital allocation instincts can slowly shift. If new management tilts away from opportunistic, high-return deals, long-term returns could suffer.
- Investment portfolio volatility: a sizeable portion of Berkshire’s earnings and comprehensive income can swing with public market valuations (see prior quarters with large swings). A market drawdown would pressure reported earnings and book value.
- Insurance underwriting shocks: a major catastrophe year or poor reinsurance outcomes could consume float and force conservative capital moves, compressing returns.
- Capital allocation missteps: buying large assets at the top of cycles or poorly executed acquisitions could destroy value given Berkshire’s size. The investing cash outflow of $39.05B in Q3 could be smart capital allocation or mis-timed deployment; we won’t know immediately.
- Illiquidity and high nominal share price: BRK.A’s huge per-share price makes tactical trading awkward; tight bids and wide effective spreads can hurt execution for retail traders.
Counterargument: You could argue Berkshire is fully priced for a steady compounding future and that Buffett’s departure removes a behavioral premium that justified a higher valuation. If new management favors steadier dividends rather than opportunistic large deals, the market might value Berkshire more like a utilities- or asset-manager rather than a growth conglomerate. That would compress the multiple and justify a wait-and-see posture rather than buying now.
What would change my mind
I would downgrade from bullish to neutral or bearish if I saw one or more of the following:
- Clear evidence management shifts to low-return capital deployment - large acquisitions at high prices or a sustained move away from opportunistic purchases.
- A multi-quarter deterioration in insurance underwriting margins or a run of material catastrophe-related losses that materially reduce float economics.
- Balance sheet stress - a sudden, unexplained decline in equity or a material increase in leverage beyond historical norms.
Conclusion
Berkshire Hathaway remains a high-quality compounding machine with an unusually large margin for error thanks to scale, insurance float, and a strong equity base (~$700B). The Q3 2025 results show robust revenue ($94.97B) and earnings ($30.86B) plus healthy operating cash flow ($13.79B). I recommend buying on weakness using the entry/stop/target framework above while respecting the stock’s liquidity characteristics and the transition headlines. Keep a close watch on capital allocation moves and underwriting trends - they are the true drivers of shareholder returns for this company.
Trade idea summary: accumulate BRK.A between 720k and 747k, stop ~5.5% below entry, target 820k and 900k with a 12–24 month time horizon. Tight position sizing and monitoring of underwriting and capital allocation are essential.
Disclosure: This is a trade idea for informational purposes only and not investment advice.