Should You Forget Berkshire Hathaway Stock and Buy Lemonade Stock Instead?
Key Points
Berkshire Hathaway uses the float from its insurance business in running the entire holding company.
Lemonade has an edge over legacy insurers in its all-digital, connected platform.
Each of these companies offers something different for investors.
Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB) is one of the biggest companies in the world, and one of only two non-tech companies sporting a market cap over $1 trillion since Walmart joined that club two weeks ago.
Berkshire Hathaway is a holding company, and it owns some of your favorite brands, including Benjamin Moore paints and Duracell batteries. It's one the largest furniture companies in the world, too, and it wholly or partially owns around 190 companies in addition to its $320 billion equity portfolio.
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One of its main industries, though, is insurance. It owns GEICO, as well as insurance products branded under its own name, and the float from insurance premiums is a major part of its operating model.
Warren Buffett, when he was still the CEO, and Ajit Jain, head of the insurance business, made several references to the company falling behind in digital in the face of young and agile upstarts. Though none were mentioned by name, Lemonade (NYSE: LMND) is one of the top insurance technology companies. Should you buy Lemonade stock instead?
Image source: Getty Images.
Why Lemonade looks ripe for picking
Lemonade is one of the new crop of digital insurance companies that are disrupting the status quo. It's one of the biggest of its type, even though it's tiny in comparison with legacy insurers.
Despite its small size, it has an edge against the traditional insurance companies because of its connected, agile platform. Although GEICO has been catching up in telematics, which are specialized methods of collecting data that digital insurance companies use to match rate to risk, Lemonade's platform was actually built as a connected ecosystem. It's growing faster than the decades-old insurance giants, and management is projecting to become profitable this year on an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) basis before hitting positive net income next year. It's also hitting it off with a younger generation of customers, alongside whom it expects to grow as they buy homes and cars.
In-force premium increased 31% year over year in the 2025 fourth quarter, an outstanding showing, and adjusted EBITDA loss shrank to $5 million.
Don't forget Berkshire Hathaway
As wonderful as Lemonade looks today, it's not a substitute for Berkshire Hathaway. They're completely different companies with different operating models, even with Berkshire Hathaway's giant insurance segment.
However, you may want to buy Lemonade stock instead of Berkshire Hathaway, depending on what your investing goals are or where there's an opening in your portfolio. Lemonade is a growth stock, and it can be a growth engine for your portfolio. If you have a long-term horizon and an appetite for a bit of risk, Lemonade could be a great stock candidate.
Should you buy stock in Lemonade right now?
Before you buy stock in Lemonade, consider this:
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Jennifer Saibil has positions in Lemonade and Walmart. The Motley Fool has positions in and recommends Berkshire Hathaway, Lemonade, and Walmart. The Motley Fool has a disclosure policy.
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