I Would Rather Own Berkshire Hathaway Than A Mutual Fund

| About: Berkshire Hathaway (BRK.B)

Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) is one of the most successful companies in the world. Over the years, the company got engaged in many successful investments and it currently owns many companies of various sizes. Some even suggest owning Berkshire Hathaway as a good alternative to owning a mutual fund. I believe Berkshire Hathaway is probably even better than owning a mutual fund based on its fundamentals.

The company's stock price moved from $48.96 to $79.29 in the last 10 years. This is a capital appreciation of 61.62%.

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Price vs. Book Value

10 years ago, the company's book value was $60.50 billion. Today it sits at $163.88 billion. This indicates a book value growth of 171%, a much larger growth than the one experienced by the stock price.

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Price vs. Earnings

A decade ago, the company used to earn $11.96 per share. Currently it earns $1,380 per share. While this is down from 2008's number of $8,400, it is still very high. Basically the company's EPS growth was 11,000% in the last decade.

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Price vs. Cash

The company holds massive amounts of cash at the moment. The company's cash is up from $8.54 billion to $34.78. Berkshire Hathaway tends to spend its cash to fully acquire profitable companies and it surely has plenty of firepower at the moment. In the last decade, the company's cash growth was 307%.

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Price vs. Free Cash Flow TTM

This is the only metric where the company looks overpriced. 10 years ago Berkshire Hathaway had a free cash flow (TTM) of $9.27 billion and today the company's free cash flow is $12.68. This is a growth of 36.86%, a little below the capital appreciation of the company in the same time period.

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Conclusion: Being one of the most successful countries in the world, Berkshire Hathaway is undervalued by a huge margin.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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