Hook / Thesis
Berkshire Hathaway remains one of the easiest - and most overlooked - ways to buy a diversified portfolio of durable businesses and large float-generating insurance operations. At the current Class A price of roughly $745,000 per share (prev close as of 01/08/2026), the market is effectively placing a discount on a company with rising operating earnings, a fortress-like balance sheet, and a new CEO who has already been signaled by the market and press as the successor to the Buffett-era era of capital allocation.
Our trade idea: take a position long BRK.A with a structured entry, defined stop, and staged targets that capture both operational upside and a likely re-rating if management leans into opportunistic capital deployment. This is a position trade - time horizon 12-24 months - aimed at investors who can tolerate short-term headline-driven volatility in exchange for exposure to a portfolio that generated meaningful earnings and cash flow in 2025.
Why the market should care
Berkshire is not a single operating company. It is a decentralized holding company whose engine is insurance float and high-quality subsidiaries: insurance (Geico, BHRG, and Primary Group), BNSF railroad, Berkshire Hathaway Energy, and a large manufacturing and services portfolio (Precision Castparts, Lubrizol, Clayton Homes and others). Management uses predictable operating cash flow from those businesses to buy assets when opportunities arise.
The fundamental driver for valuation is simple: persistent underwriting and operating earnings plus a sizable investment portfolio and retained earnings should produce a steadily growing equity base. If the market recognizes that earnings are growing and capital allocation remains disciplined under the new CEO, the share price should re-rate higher relative to book and free cash flow generation.
What the numbers say
Use these figures to judge recent momentum and balance-sheet strength:
- Revenues have shown steady sequential growth during 2025: $89.7 billion in Q1 (01/01/2025 - 03/31/2025), $92.5 billion in Q2 (04/01/2025 - 06/30/2025), and $94.97 billion in Q3 (07/01/2025 - 09/30/2025). That is consistent, broad-based top-line strength across the operating base.
- Net income attributable to the parent accelerated through 2025: $4.60 billion in Q1, $12.37 billion in Q2, and $30.80 billion in Q3 - demonstrating both operating profit and investment-related gains in the later quarter.
- Operating income was healthy and stable: operating income in Q3 2025 was $15.836 billion, and across Q1-Q3 2025 operating income readings were in the $11-14 billion range per quarter, underscoring a sizeable recurring operating profit margin across the portfolio.
- Balance sheet strength: as of the quarter ending 09/30/2025 (filed 11/03/2025), total assets were $1.225963 trillion and equity was $700.441 billion (equity attributable to parent roughly $698.155 billion). The company has a large capital base to deploy and a liability structure that has remained manageable.
- Operating cash flow in Q3 2025 was $13.789 billion. While investing cash flows were outflows of $39.052 billion in the quarter (reflecting acquisitions, portfolio purchases or similar activity), operating cash generation remains robust and financing flows were modest (+$0.835 billion in the quarter).
- Company-level guidance context: Berkshire is expected to generate close to $375 billion in revenue in 2025, reflecting the sum of its massive underlying businesses and reinforcing the view that the company is a material economic aggregator.
Valuation framing - why 'undervalued' is defensible
Valuation of a conglomerate with concentrated class A shares is imperfect if you anchor solely to the A-share price. But two observable facts support a 'cheap' label:
- Book value (equity) is now in the high hundreds of billions. As of 09/30/2025, equity attributable to parent is approximately $698.155 billion. That equity base has expanded through 2025 alongside rising operating earnings.
- Class A price movements over the last 12 months show a trading range roughly between $660,000 and $812,000 per share. Today's $745,000 price sits well within that band despite the equity base and earnings trajectory improving through the year. If the market re-applies even a modestly higher multiple to Berkshire's earnings or recognizes replacement-value elements of the asset base, the upside is significant.
Because publicly listed peers for a Buffett-style conglomerate are imperfect, this is a qualitative valuation case: Berkshire combines high-quality regulated utility cash flows, railroad economics, durable manufacturing franchises, and an insurance float engine. When those are considered together, a rational private-market buyer would likely pay materially more than the current market-implied valuation if forced to buy the whole enterprise.
Trade mechanics - Actionable entry, stops, targets
Trade idea: Long BRK.A (Class A)
- Entry: Accumulate in the $730,000 - $760,000 range. If you prefer a staggered approach, split into two equal tranches at $755,000 and $740,000 to smooth execution risk.
- Initial stop: $675,000 per share (roughly a 9-11% downside from entry depending on fill) - this level is below the recent multi-month support band near $710k-$720k but above the deeper 12-month lows, offering room for normal headline volatility while protecting capital on a clear invalidation of the thesis.
- Primary target: $820,000 - first take-profit zone; implies mid-teens upside from entry and captures partial re-rating toward the upper end of the year-long trading band.
- Stretch target: $900,000 - for patient holders who keep exposure through multiple catalysts and potential incremental valuation expansion tied to capital allocation success or outsized investment gains.
- Position sizing: keep individual position to a size that, if the trade fails to stop out, would not impair overall portfolio risk tolerance. Berkshire can be volatile around macro or investment-result headlines despite its size.
Catalysts
- CEO transition clarity and execution - press and market attention on the new CEO (Greg Abel was highlighted in multiple recent write-ups) could remove uncertainty and allow investors to focus on operating results rather than succession noise.
- Accelerated capital deployment or a visible large acquisition - the market rewards disciplined but decisive use of Berkshire's balance sheet when deals are accretive to book and earnings.
- Improving underwriting profitability in insurance operations or a strong personal lines result at Geico - both would increase float-derived returns and lower the cost of capital.
- Continued sequential earnings and book-value growth. Q1 through Q3 2025 showed rising revenues and net income - if that continues, multiples should expand.
Risks and counterarguments
Any long needs to respect several real risks. Here are the primary ones plus a direct counterargument to my bullish thesis.
- Investment mark-to-market volatility: a significant drawdown in the investment portfolio could compress comprehensive income and scare short-term holders. The company has large marketable securities that can swing reported earnings materially.
- Capital allocation missteps: new leadership could make acquisitions or deployments the market dislikes. Poorly timed large purchases would weigh on returns and sentiment.
- Underwriting shock in insurance: an unexpected underwriting loss or catastrophe exposure could reduce float benefits and force higher capital requirements, pressuring near-term earnings and cash flow.
- Macroeconomic slowdown: a recession that dents earnings at BNSF, manufacturing subsidiaries, or end markets for consumer-facing businesses could lead to declining operating income and a lower multiple.
- Counterargument: The market may be rationally pricing structural limits to growth. Berkshire is massive - low-single-digit organic growth in aggregate operating earnings is realistic; absent an aggressive re-rating of conglomerates, cheapness may persist. If the market demands faster growth, Berkshire may remain range-bound.
Conclusion and what would change my mind
Stance: Long BRK.A - position trade. The combination of rising quarterly revenues and net income across 2025, a $700+ billion equity base, and material operating cash flow argues that the company is capable of a re-rating, particularly if capital allocation under Greg Abel is constructive. The trade is not risk-free: mark-to-market swings, underwriting shocks, or a misstep on large acquisitions could easily generate meaningful downside. Use a disciplined entry, tight stop, and staged targets.
What would change my mind: evidence of sustained deterioration in underwriting results, a material and value-destructive acquisition, or quarter-to-quarter declines in operating income would prompt me to exit. Conversely, public signals of repeatable buybacks or accretive large-scale deals that increase intrinsic value faster than the market expects would make me more aggressively bullish.
Disclosure: This is a trade idea for educational purposes only and not personalized investment advice. Check your own situation and risk tolerance before acting.