Is Berkshire Hathaway the Smartest Investment You Can Make Today?

Key Points

• Berkshire's fortress balance sheet and enormous cash pile make the business unusually resilient.

• The conglomerate's earnings are broad-based, coming from insurance, rail, energy, a large stock portfolio, and many other subsidiaries.

• The stock isn't the highest-upside idea, but trading at just 1.6 times book value with a record war chest, the risk-reward is compelling.

• 10 stocks we like better than Berkshire Hathaway ›

Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) has crossed the $1 trillion mark in market value this year -- a milestone famed investor and Berkshire CEO and chairman Warren Buffett should be proud of as he gets ready to step down from his chief executive role at the end of this year. The Omaha-based conglomerate owns insurers like GEICO and General Re, the BNSF railroad, Berkshire Hathaway Energy, and a wide range of manufacturing, service, and retail operations -- alongside a massive portfolio of stocks. Shares have risen about 8% this year, lagging the overall market but putting up a nice return for a mature, cash cow that always puts risk management first.

The bigger story isn't the stock chart, though -- it's the business. Berkshire is run to withstand shocks and be ready for opportunity. That design shows up most clearly in its cash position and in management's insistence on staying patient until prices make sense. Put differently, this is not a stock likely to deliver the highest return in a bull market, but it may be the smartest addition to a diversified portfolio if you care about risk-adjusted results.

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A rock-solid balance sheet with a war chest of cash

Berkshire's latest quarter underscores the point. In the second quarter of 2025, operating earnings were about $11.2 billion, down 4% year over year. But this was up against a very tough comparison, when operating earnings rose 15% in the year-ago quarter. In the second quarter of 2025, insurance investment income remained a bright spot thanks to higher short-term rates. Insurance float -- the pool of policyholder funds Berkshire invests -- ended the quarter near $174 billion, up about $3 billion from the end of 2024. Management noted that investment income is being driven by a policy of holding more Treasury bills -- a low-risk capital allocation choice that adds ballast when markets wobble.

Liquidity is where Berkshire stands apart. As of June 30, the company held roughly $340 billion in cash, cash equivalents, and U.S. Treasury bills across its businesses. Management continues to emphasize that financial strength and redundant liquidity will always be of paramount importance.

A favorable risk-to-reward profile

What makes Berkshire compelling today is how the pieces fit together for investors. The diversified earnings base and conservative balance sheet help mitigate downside risks, while the stock portfolio and operating businesses offer upside potential. Of course, one risk is if short-term yields decline from here, Berkshire's interest income on that cash hoard will fall. But lower rates would also tend to support equity values and financing conditions for operating subsidiaries, which helps balance the picture.

Valuation looks reasonable for what you get. Berkshire trades at a price-to-book multiple of about 1.6, squarely within a band that has often produced solid long-term outcomes for Berkshire shareholders. That multiple isn't cheap. But you're paying for a collection of resilient businesses, a massive equity portfolio currently valued at more than $300 billion, and a manager who has repeatedly shown he'll act when the odds are favorable.

Of course, Berkshire's pile of cash does more than help add downside protection; it also provides optionality. Indeed, the optionality from its excess cash is arguably the most important part of the investment thesis for the stock. Warren Buffett has been explicit that Berkshire will wait for truly attractive opportunities and then move decisively. That patience can be hard to sit through when markets are roaring. But for a core allocation, it's precisely the temperament investors want.

Stepping back, Berkshire may not be the top-performing stock of the next five years. That isn't the bar. As a foundation for a broader portfolio, few companies combine resilience, breadth, and flexibility this well. The cash provides offense when markets sell off. The diversified collection of operating businesses provides steady cash flow for the conglomerate in most environments. And the stock's reasonable valuation leaves room for upside as earnings compound over time.

For investors aiming to improve the overall risk-to-reward profile of their portfolio, Berkshire Hathaway may truly be the smartest investment you can make today.

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Daniel Sparks and his clients do not have positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.