Why You Should Own Berkshire But Buy 5% Yielding Allianz Today

May 05, 2022 8:00 AM ETAllianz SE (ALIZY), BRK.A, BRK.B, ALIZF75 Comments34 Likes

Summary

  • Berkshire is one of the greatest companies in history, delivering almost 21% annual returns for 56 years. In the last 36 years, it's delivered 74X inflation-adjusted returns.
  • In the future, analysts expect about 11% returns from BRK, 1% more than the S&P 500, courtesy of its incredible portfolio, cash generation, and infrastructure investment opportunities.
  • However, when it comes to safety and quality, yield, valuation, and long-term return potential, Allianz is the superior investment today.
  • Rating agencies consider ALIZY the world's best insurance company, with legendary risk management so strong it hasn't missed a dividend payment in 132 years.
  • Most investors would do well owning both BRK and ALIZY in their diversified and prudently risk-managed portfolios. However, today ALIZY offers 2X the 5-year consensus return potential of BRK and is the far better buy.
  • Looking for a portfolio of ideas like this one? Members of The Dividend Kings get exclusive access to our model portfolio. Learn More »

open vault door and money dollars coming out.

tiero/iStock via Getty Images

Berkshire Hathaway (NYSE:BRK.B) (NYSE:BRK.A) has become a legendary company run by the greatest long-term investor of all time.

Even income investors who love dividends have made an exception for this blue-chip, and for understandable reasons.

  • 20.5% annual returns for 56 years

Even in more modern times, when Berkshire's growth has understandably grown more slowly, Buffett's empire has delivered incredible results.

BRK Total Returns Since 1986

Berkshire returns and CAGR

Source: Portfolio Visualizer Premium

Over the last 36 years, the S&P has been on fire, driven by a powerful combo of falling interest rates and a red hot tech sector.

Yet, Berkshire has managed to outperform the market by 5% annually, delivering 195X returns.

Berkshire portfolio growth

Source: Portfolio Visualizer Premium

Adjusted for inflation BRK's 74X returns have beaten the S&P by almost 5X.

Berkshire Hathaway vs Vanguard 500 index investor

Source: Portfolio Visualizer Premium

The average rolling return at BRK is far superior to the market's and it's never experienced a lost decade like the S&P 500 has.

And the good news is that analysts expect Buffett's empire to keep on generating strong, market-beating returns in the coming years and decades.

But prudent investing isn't just about buying wonderful companies at fair prices and holding for the long-term.

It's also about balancing our limited savings with opportunity costs.

So let me show you the five reasons why Berkshire is a classic "buy and hold forever" blue-chip that most people would do very well to own in their portfolios.

But I also want to point out the reasons why 5% yielding Allianz (OTCPK:ALIZY) (OTCPK:ALIZF) is a far better buy today for most income investors.

Or to put it another way, let me show you why you should own Berkshire, but buy Allianz today.

Reason One: Safety And Quality, Winner Allianz

There are many ways to measure safety and quality and I factor in pretty much all of them.

The Dividend Kings' overall quality scores are based on a 248-point model that includes:

  • Dividend safety

  • Balance sheet strength

  • Credit ratings

  • Credit default swap medium-term bankruptcy risk data

  • Short and long-term bankruptcy risk

  • Accounting and corporate fraud risk

  • Profitability and business model

  • Growth consensus estimates

  • Management growth guidance

  • Historical earnings growth rates

  • Historical cash flow growth rates

  • Historical dividend growth rates

  • Historical sales growth rates

  • Cost of capital

  • GF Scores
  • Long-term risk-management scores from MSCI, Morningstar, FactSet, S&P, Reuters'/Refinitiv, and Just Capital

  • Management quality

  • Dividend friendly corporate culture/income dependability

  • Long-term total returns (a Ben Graham sign of quality)

  • Analyst consensus long-term return potential

In fact, it includes over 1,000 fundamental metrics including the 12 rating agencies we use to assess fundamental risk.

  • credit and risk management ratings make up 41% of the DK safety and quality model
  • dividend/balance sheet/risk ratings make up 82% of the DK safety and quality model

How do we know that our safety and quality model work well?

During the two worst recessions in 75 years, our safety model 87% of blue-chip dividend cuts, the ultimate baptism by fire for any dividend safety model.

And then there's the confirmation that our quality ratings are very accurate.

DK Zen Phoenix: Superior Fundamentals Lead To Superior Long-Term Results

Metric US Stocks 191 Real Money DK Phoenix Recs
Great Recession Dividend Growth -25% 0%
Pandemic Dividend Growth -1% 6%
Positive Total Returns Over The Last 10 Years 42% 99.5% (Greatest Investors In History 60% to 80% Over Time)
Lost Money/Went Bankrupt Over The Last 10 Years 47% 0.5%
Outperformed Market Over The Last Decade (290%) 36% 46%
Bankruptcies Over The Last 10 Years 11% 0%
Permanent 70+% Catastrophic Decline Since 1980 44% 0.5%
100+% Total Return Over The Past 10 Years NA 87%
200+% Total Return Over The Past 10 Years NA 66%
300+% Total Return Over The Past 10 Years NA 44%
400+% Total Return Over The Past 10 Years NA 35%
500+% Total Return Over The Past 10 Years NA 27%
600+% Total Return Over The Past 10 Years NA 23%
700+% Total Return Over The Past 10 Years NA 20%
800+% Total Return Over The Past 10 Years NA 18%
900+% Total Return Over The Past 10 Years NA 18%
1000+% Total Return Over The Past 10 Years NA 16%
Sources: Morningstar, JPMorgan, Seeking Alpha

Basically, historical market data confirms that the DK safety and quality model is comprehensive and accurate.

How does Berkshire score on our comprehensive safety and quality models?

BRK Balance Sheet Safety

Rating Dividend Kings Safety Score (161 Point Safety Model) Approximate Dividend Cut Risk (Average Recession)

Approximate Dividend Cut Risk In Pandemic Level Recession

1 - unsafe 0% to 20% over 4% 16+%
2- below average 21% to 40% over 2% 8% to 16%
3 - average 41% to 60% 2% 4% to 8%
4 - safe 61% to 80% 1% 2% to 4%
5- very safe 81% to 100% 0.5% 1% to 2%
BRK.B 92% NA NA
Risk Rating Medium-Risk (47h industry percentile risk-management consensus) AA Stable outlook credit rating 0.51% 30-year bankruptcy risk 20% OR LESS Max Risk Cap Recommendation

Long-Term Dependability

Company DK Long-Term Dependability Score Interpretation Points
Non-Dependable Companies 21% or below Poor Dependability 1
Low Dependability Companies 22% to 60% Below-Average Dependability 2
S&P 500/Industry Average 61% (61% to 70% range) Average Dependability 3
Above-Average 71% to 80% Very Dependable 4
Very Good 81% or higher Exceptional Dependability 5
BRK.B 66% Average Dependability 3

Overall Quality

BRK.B Final Score Rating
Safety 92% 5/5 very safe
Business Model 80% 3/3 wide moat, stable
Dependability 66% 3/5 average
Total 80% 11/13 SWAN
Risk Rating

2/3 Medium Risk

10% OR LESS Max Risk Cap Rec

15% Margin of Safety For A Potentially Good Buy

BRK is one of the world's greatest companies.

In fact, BRK is in the 54th percentile of all companies on the Dividend Kings Master list. That might not sound impressive but take a look at that list!

The DK 500 Master List includes the some of the world's highest quality companies including:

  • All dividend champions

  • All dividend aristocrats

  • All dividend kings

  • All global aristocrats (such as BTI, ENB, and NVS)

  • All 13/13 Ultra Swans (as close to perfect quality as exists on Wall Street)

  • 49 of the world's best growth stocks

But as great as BRK is it pales in comparison to the glorious quality of Allianz.

ALIZY Dividend Safety

Rating Dividend Kings Safety Score (151 Point Safety Model) Approximate Dividend Cut Risk (Average Recession)

Approximate Dividend Cut Risk In Pandemic Level Recession

1 - unsafe 0% to 20% over 4% 16+%
2- below average 21% to 40% over 2% 8% to 16%
3 - average 41% to 60% 2% 4% to 8%
4 - safe 61% to 80% 1% 2% to 4%
5- very safe 81% to 100% 0.5% 1% to 2%
ALIZY 97% 0.5% 1.20%
Risk Rating Low Risk (87th industry percentile consensus) AA stable outlook credit rating 0.51% 30-year bankruptcy risk 15% OR LESS Max Risk Cap Recommendation

Long-Term Dependability

Company DK Long-Term Dependability Score Interpretation Points
Non-Dependable Companies 21% or below Poor Dependability 1
Low Dependability Companies 22% to 60% Below-Average Dependability 2
S&P 500/Industry Average 61% (58% to 70% range) Average Dependability 3
Above-Average 71% to 80% Very Dependable 4
Very Good 81% or higher Exceptional Dependability 5
ALIZY 100% Exceptional Dependability 5

Overall Quality

ALIZY Final Score Rating
Safety 97% 5/5 very safe
Business Model 60% 2/3 above-average
Dependability 100% 5/5 exceptional
Total 96% 12/13 Super SWAN
Risk Rating 3/3 Low Risk
15% OR LESS Max Risk Cap Rec

10% Margin of Safety For A Potentially Good Buy

ALIZY is in the 96th percentile of the world's best companies.

And don't just take my word for it.

The rating agencies consider Allianz to be the world's best-run and highest quality insurance company.

Allianz Credit Ratings

Rating Agency Credit Rating 30-Year Default/Bankruptcy Risk Chance of Losing 100% Of Your Investment 1 In
S&P AA stable 0.51% 196.1
Fitch AA- stable 0.55% 181.8
Moody's Aa3 (AA- equivalent) Stable 0.55% 181.8
AM Best A+ stable 0.60% 166.7
Consensus AA- stable 0.55% 181.0

(Sources: S&P, Fitch, Moody's, AM Best)

Allianz is the highest-rated private insurance company in the world.

A 1 in 181 chance of losing all your money in the next 30 years.

BRK Credit Ratings

Rating Agency Credit Rating 30-Year Default/Bankruptcy Risk Chance of Losing 100% Of Your Investment 1 In
S&P AA Stable Outlook 0.51% 196.1
Fitch AA- Stable Outlook 0.55% 181.8
Moody's Aa2 (AA equivalent) Stable 0.51% 196.1
Consensus AA Stable Outlook 0.52% 191.1

(Sources: S&P, Fitch, Moody's)

That's not to say that BRK is a riskier company, they are both basically very close to risk-free long-term investments.

  • assuming you avoid becoming a forced seller for emotional or financial reasons

But here's something that income investors will appreciate about Allianz:

  • built to last
  • a focus on risk management above all else
  • has survived and prospered through dozens of recessions, depressions, 2 World Wars, the cold war, commodity spikes, deflation and inflationary conditions, high and low-interest rates
  • approximately 100 bear markets and corrections over 132 years
  • has never missed a dividend payment since 1890

Allianz is so dependable that it hasn't missed a dividend payment in 132 years.

  • not even during WWI or WWII
  • if ALIZY ever fails to pay its dividend the world is likely over and we're too dead to care about our portfolios

Reason Two: Growth Outlook, Winner Berkshire

Berkshire's Historical Growth Rates

BRK has grown at between 6% and 32% annually over the last 20 years, but over the past two decades, its overall growth rate was 10.9%.

Guess what analysts think it will be over the long-term? 10.9% CAGR vs 8.5% for the S&P 500.

Why do analysts think BRK will grow about 25% faster than the market's earnings?

First, there's BRK's stock portfolio powered by BRK's incredible $150 billion in insurance float and $2 billion in monthly free cash flow.

  • $86 billion in investable cash after BRK bought $41 billion worth of stocks in Q1

Let's repeat that, the greatest investor of all time put 1/3 of his investable cash to work in Q1 2022.

It was the 12th worst month for the Nasdaq in history, the worst April for the S&P since 1972 and the worst 4-month start to the year since 1939.

S&P 500 worst performance

Charlie Bilello

Buffett is smart enough to know that timing the market isn't as important as putting money to work in great companies at great prices.

"It's better to be approximately right than precisely wrong." - Warren Buffett

Buffett began buying stocks hand over fist in October 2008.

Stocks went on to fall another 35% after that.

But compared to people who sat in cash the entire time?

Who sat in cash for years after the Great Recession ended?

Buffett was approximately right and they were precisely wrong.

In terms of organic growth, BRK has many wonderful growth levers to pull.

Most of this is from its utility businesses.

  • S&P estimates that turning America's energy grid into a smart grid will cost approximately $13 trillion.
  • The UN estimates that the world needs to spend $5 trillion to $7 trillion per year for the next 10 to 30 years to make the green energy transition.

Brookfield Asset Management (BAM) calls the green energy transition one of the single greatest investment opportunities in human history and BRK's strong position in utilities and railroads (which will be needed to power the infrastructure spending) give it a decades-long growth runway.

What Berkshire's Growth Could Mean For Long-Term Investors

10.9% growth is better than the market's but it's not going to light the world on fire. But that's not what long-term investors are looking for from BRK.

Inflation-Adjusted Consensus Return Potential: $1,000 Initial Investment

Time Frame (Years) 7.5% CAGR Inflation-Adjusted S&P Consensus 8.6% Inflation-Adjusted Aristocrat Consensus 8.4% CAGR Inflation-Adjusted BRK Consensus Difference Between Inflation Adjusted BRK Consensus And S&P Consensus
5 $1,436.30 $1,511.29 $1,497.43 $61.13
10 $2,062.95 $2,284.01 $2,242.30 $179.35
15 $2,963.01 $3,451.81 $3,357.69 $394.68
20 $4,255.76 $5,216.70 $5,027.90 $772.14
25 $6,112.54 $7,883.98 $7,528.94 $1,416.40
30 $8,779.42 $11,915.01 $11,274.06 $2,494.64

(Source: DK Research Terminal, FactSet)

Time Frame (Years) Ratio Aristocrats/S&P Ratio Inflation-Adjusted BRK Consensus And S&P Consensus
5 1.05 1.04
10 1.11 1.09
15 1.16 1.13
20 1.23 1.18
25 1.29 1.23
30 1.36 1.28

(Source: DK Research Terminal, FactSet)

BRK is basically an index fund, one that has beaten the market for decades and is expected to keep doing so for decades to come.

What about Allianz which is an insurance company and asset manager and lacks Berkshire's obvious infrastructure growth catalyst?

Investment Strategy Yield LT Consensus Growth LT Consensus Total Return Potential Long-Term Risk-Adjusted Expected Return Long-Term Inflation And Risk-Adjusted Expected Returns Years To Double Your Inflation & Risk-Adjusted Wealth

10 Year Inflation And Risk-Adjusted Return

Safe Midstream 5.2% 6.0% 11.2% 7.8% 5.3% 13.5 1.68
Allianz 5.1% 6.0% 11.1% 7.8% 5.3% 13.6 1.67
Adam's Planned Correction Buys 3.9% 18.9% 22.8% 16.0% 13.5% 5.3 3.54
10-Year US Treasury 3.0% 0.0% 3.0% 2.1% -0.4% -175.2 0.96
High-Yield 2.9% 10.3% 13.2% 9.2% 6.8% 10.7 1.92
REITs 2.9% 6.5% 9.4% 6.6% 4.1% 17.6 1.49

(Source: Morningstar, FactSet, YCharts)

Management is guiding for 6% long-term earnings and dividend growth from Allianz while analysts expect 8.8% growth.

Using management's more conservative estimates, we can still see that ALIZY offers very attractive high-yield return potential.

  • better than the S&P 500's 10.0%
  • and matching the aristocrats 11.2% (but with more than 2X the very safe yield)

What does this mean for long-term return potential?

What Allianz's Growth Could Mean For Long-Term Investors

6% growth doesn't sound exciting until you realize you're getting paid 5.1% (after the tax credit) for owning the world's best insurance company.

Inflation-Adjusted Consensus Return Potential: $1,000 Initial Investment

Time Frame (Years) 7.5% CAGR Inflation-Adjusted S&P Consensus 8.6% Inflation-Adjusted Aristocrat Consensus 8.6% CAGR Inflation-Adjusted ALIZY Consensus Difference Between Inflation Adjusted ALIZY Consensus And S&P Consensus
5 $1,436.30 $1,511.29 $1,511.29 $75.00
10 $2,062.95 $2,284.01 $2,284.01 $221.06
15 $2,963.01 $3,451.81 $3,451.81 $488.80
20 $4,255.76 $5,216.70 $5,216.70 $960.94
25 $6,112.54 $7,883.98 $7,883.98 $1,771.44
30 $8,779.42 $11,915.01 $11,915.01 $3,135.59

(Source: DK Research Terminal, FactSet)

Time Frame (Years) Ratio Aristocrats/S&P Ratio Inflation-Adjusted ALIZY Consensus And S&P Consensus
5 1.05 1.05
10 1.11 1.11
15 1.16 1.16
20 1.23 1.23
25 1.29 1.29
30 1.36 1.36

(Source: DK Research Terminal, FactSet)

ALIZY is expected to modestly outperform BRK over time, delivering potentially 12X inflation-adjusted returns over the next 30 years.

Reason Three: Valuation, Winner Allianz

Allianz Fair Value

Metric Historical Fair Value Multiples (all-years) 2021 2022 2023 2024

12-Month Forward Fair Value

13-Year Median Yield 4.38% $27.85 $26.60 $26.60 $33.11
Earnings 10.63 $19.13 $25.19 $28.28 $31.57
Average $22.68 $25.88 $27.41 $32.32 $26.41
Current Price $22.62

Discount To Fair Value

0.29% 12.59% 17.48% 30.01% 14.34%

Upside To Fair Value (NOT Including Dividends)

0.29% 14.40% 21.18% 42.88% 16.75% (22% including dividend)
2022 EPS 2023 EPS 2022 Weighted EPS 2023 Weighted EPS 12-Month Forward EPS 12-Month Average Fair Value Forward PE

Current Forward PE

$2.37 $2.66 $1.55 $0.92 $2.47 10.7 9.2

ALIZY is historically worth about 10.7X earnings and today trades at just 9.2X.

Analyst Median 12-Month Price Target

Morningstar Fair Value Estimate

$27.40 (10.3 PE) $24.90 (10.1 PE)

Discount To Price Target (Not A Fair Value Estimate)

Discount To Fair Value

17.45% 9.16%

Upside To Price Target (Not Including Dividend)

Upside To Fair Value (Not Including Dividend)

21.13% 10.08%

12-Month Median Total Return Price (Including Dividend)

Fair Value + 12-Month Dividend

$28.57 $26.07

Discount To Total Price Target (Not A Fair Value Estimate)

Discount To Fair Value + 12-Month Dividend

20.81% 13.22%

Upside To Price Target (Including Dividend)

Upside To Fair Value + Dividend

26.28% 15.23%

Analysts expect ALIZY to deliver 26% total returns in the next year and that's justified by its fundamentals.

What about BRK?

Berkshire Fair Value

Metric Historical Fair Value Multiples (13-Years) 2021 2022 2023 2024

12-Month Forward Fair Value

Earnings 22.87 $277.18 $273.98 $285.88 $377.58
Average $277.18 $273.98 $285.88 $377.58 $278.10
Current Price $320.30

Discount To Fair Value

-15.55% -16.91% -12.04% 15.17% -15.17%
Upside To Fair Value -13.46% -14.46% -10.75% 17.88% -13.18%
2022 EPS 2023 EPS 2022 Weighted EPS 2023 Weighted EPS 12-Month Forward OCF 12-Month Average Fair Value Forward PE

Current Forward PE

$11.98 $12.50 $7.83 $4.33 $12.16 22.9 26.3

BRK is historically modestly overvalued at 26.3X earnings compared to its market-determined fair value of about 23X.

Analyst Median 12-Month Price Target

Morningstar Fair Value Estimate

$365.84 (30.1 PE) $367.00 (30.2 PE)

Discount To Price Target (Not A Fair Value Estimate)

Discount To Fair Value

12.46% 12.74%

Upside To Price Target

Upside To Fair Value

14.24% 14.60%

Analysts are still bullish on BRK expecting it will trade at 30X earnings within a year, which is Morningstar's estimate of fair value.

91% Statistical Probability BRK Is Worth Between 22 and 23.5X Earnings

Time Frame (Years) Average PE
20 22.53
19 22.53
18 22.2
17 22.48
16 22.74
15 22.43
14 22.76
13 22.76
12 22.11
11 22.42
10 22.87
9 23.38
8 22.56
7 23.11
6 23.26
5 23.99
4 24.37
3 23.36
2 24.37
1 24.98
Average 23.06
Median 22.76
Harmonic Average 23.04

(Source: FAST Graphs, FactSet)

BRK might every well trade at 30X earnings at some point but as you can see, to call that "fair value" is rather speculative given its 20 years of historical market-determined fair values.

Reason Four: Medium-Term Total Return Potential, Winner Allianz

Investors don't have to wait for decades for Allianz to deliver slightly superior returns compared to BRK.

They likely only have to wait a few years.

ALIZY 2024 Consensus Total Return Potential

ALIZY 2024 Consensus Total Return Potential

(Source: FAST Graphs, FactSet)

If ALIZY grows as analysts expect by 2024, it could deliver 70% total returns, or 22% annually.

  • Buffett-like returns from an anti-bubble blue-chip bargain hiding in plain sight

ALIZY 2027 Consensus Total Return Potential

ALIZY 2027 Consensus Total Return Potential

(Source: FAST Graphs, FactSet)

Over the next five years, analysts think ALIZY could deliver 15% annual returns.

  • about 4X more than the S&P 500
  • about 2X more than BRK

BRK 2024 Consensus Total Return Potential

Berkshire 2024 Consensus Total Return Potential

(Source: FAST Graphs, FactSet)

If BRK grows as analysts expect by 2024, it could deliver 18% total returns, or 7% annually.

  • about 50% less than ALIZY

BRK 2027 Consensus Total Return Potential

Berkshire 2027 Consensus Total Return Potential

(Source: FAST Graphs, FactSet)

BRK's 5-year consensus return potential is 9% per year, or 62% total returns.

  • about 50% better than the S&P 500
  • but 50% less than ALIZY

ALIZY Investment Decision Score

x

DK

Allianz stock rating

(Source: DK Automated Investment Decision Tool)

Compared to the S&P 500 ALIZY is a potentially excellent investment idea.

  • 20% better valuation
  • more than 3X the yield (and a safer yield at that)
  • 2X the risk-adjusted expected returns over the next five years

BRK Investment Decision Score

Berkshire Hathaway stock rating

(Source: DK Automated Investment Decision Tool)

Compared to the market BRK is a slightly below-average investment opportunity right now.

  • 3% worse valuation
  • just 1% higher risk-adjusted expected return

Reason Five: Long-Term Risk Management, Winner Allianz

  • See the risk section of this video to get an in-depth view (and link to two reports) of how DK and big institutions measure long-term risk management by companies

There are no risk-free companies and no company is right for everyone. You have to be comfortable with the fundamental risk profile.

Allianz's Risk Profile Summary

  • Regulatory risk: mostly pertaining to tax rates and capital requirements
  • Interest rate risk: portfolio yield affected by interest rates
  • Equity risk: from the stocks they own in their portfolios
  • Credit spread risk: bond values are affected by credit market conditions
  • Inflation risk: higher inflation hurts reinsurance profits
  • Currency risk: ALIZY operates in over 70 countries (uses hedges to manage this)
  • Underwriting risk: potentially larger than expected losses due to disasters and black swans like pandemics
  • Credit risks: if counterparties fail
  • Labor retention risk (tightest job market in over 50 years and finance is a high paying industry) - rising wage pressures around the world
  • Accounting fraud risk: significantly less than 17.5% statistical chance of accounting fraud

BRK's Risk Profile Summary

Our uncertainty rating for Berkshire is medium....Berkshire has generally scored lower on governance issues because of the makeup of its board and board committees, the unequal voting structure of its shares, and the lack of engagement and opaqueness historically on governance issues.

Berkshire faces the risk that insurance claims exceed loss reserves or that material impairments affect its investment portfolio. Several of the firm's key businesses--insurance, energy generation and distribution, and rail transport--operate in industries that are subject to higher degrees of regulatory oversight, which could affect future business combinations, as well as the setting of rates charged to customers. Many of the company's noninsurance operations are exposed to the cyclicality of the economy, with results suffering during economic slowdowns.

Berkshire is exposed to foreign currency, equity price, and credit default risk through its various investments and operating companies. Its derivative contracts could affect the firm's earnings and capital position, especially during more volatile markets, as they are recorded at fair value and updated periodically to reflect any changes in value. These contracts started expiring in 2019 and will continue to do so until 2025.

Berkshire depends on two key employees--Warren Buffett and Charlie Munger--for almost all of its investment and capital-allocation decisions. With Buffett turning 92 in August 2022 and Munger turning 98 in January 2022, it is increasingly likely that our valuation horizon will exceed their life spans, with the quality of investment returns and capital allocation being affected." - Morningstar

How do both companies manage their complex risk profiles?

Allianz Long-Term Risk Management Consensus

Rating Agency Industry Percentile

Rating Agency Classification

MSCI 37 Metric Model 100.0%

AAA Industry Leader, Stable Trend

Morningstar/Sustainalytics 20 Metric Model 93.2%

16.1/100 Low-Risk

Reuters'/Refinitiv 500+ Metric Model 100.00%

Exceptional, #1 Industry Leader

S&P 1,000+ Metric Model 93.0%

Exceptional- Stable Trend

FactSet 50.0%

Average- Positive Trend

Morningstar Global Percentile 88.44 Very Good
Consensus 87.4% Very Good, Bordering On Excellent, Low-Risk, Stable Trend

(Sources: MSCI, Morningstar, Reuters', S&P, FactSet Research)

Allianz Long-Term Risk Management Is The 20th Best In The Master List (96th Percentile)

Allianz's risk-management consensus is in the top 4% of the world's highest quality companies and similar to that of such other companies as

  • Amgen (AMGN)
  • Enbridge (ENB) - global aristocrat
  • 3M (MMM) - dividend king
  • Bank of Nova Scotia (BNS)
  • Texas Instruments (TXN)
  • Lockheed Martin (LMT)
  • Colgate-Palmolive (CL) - dividend king
  • Microsoft (MSFT)
  • Adobe (ADBE)

Berkshire Long-Term Risk Management Consensus

Rating Agency Industry Percentile

Rating Agency Classification

MSCI 37 Metric Model 19.0%

BB, Below-Average, Positive Trend

Morningstar/Sustainalytics 20 Metric Model 90.9%

22.5/100 Medium-Risk

Reuters'/Refinitiv 500+ Metric Model 24.6% Satisfactory
S&P 1,000+ Metric Model 10.0%

Very Poor, Stable Trend

Just Capital 19 Metric Model 45.0%

Average

FactSet 50.0% Average
Morningstar Global Percentile (All 15,000 Rated Companies) 88.6% Very Good
Just Capital Global Percentile (All 954 Rated US Companies) 45.3%

Average

Consensus 47%

Medium, Average Risk-Management, Stable Trend

(Sources: MSCI, Morningstar, Reuters', S&P, FactSet Research)

Berkshire Long-Term Risk Management Is The 398th Best In The Master List (20th Percentile)

BRK's risk-management consensus is in the bottom 20% of the world's highest quality companies and similar to that of such other companies as:

  • Genuine Parts Company (GPC) - dividend king
  • Roper Technologies (ROP) - dividend aristocrat
  • Broadcom (AVGO)
  • Pfizer (PFE)
  • Altria (MO) - dividend king

For context, here are how both companies compare on risk management to the Master List.

Classification Average Consensus LT Risk-Management Industry Percentile

Risk-Management Rating

S&P Global (SPGI) #1 Risk Management In The Master List 94 Exceptional
Allianz 87 Very Good, Bordering on Exceptional
Strong ESG Stocks 78

Good - Bordering On Very Good

Foreign Dividend Stocks 75 Good
Ultra SWANs 71 Good
Low Volatility Stocks 68 Above-Average
Dividend Aristocrats 67 Above-Average
Dividend Kings 63 Above-Average
Master List average 62 Above-Average
Hyper-Growth stocks 61 Above-Average
Monthly Dividend Stocks 60 Above-Average
Dividend Champions 57 Average
Berkshire 47 Average

(Source: DK Research Terminal)

How We Monitor Allianz's Risk Profile

  • 19 analysts
  • 4 credit rating agencies
  • 8 total risk rating agencies
  • 27 experts who collectively know this business better than anyone other than management
  • and the bond market for real-time fundamental risk analysis

How We Monitor Berkshire's Risk Profile

  • 7 analysts
  • 3 credit rating agencies
  • 9 total risk rating agencies
  • 16 experts who collectively know this business better than anyone other than management
  • and the bond market for real-time fundamental risk analysis

"When the facts change, I change my mind. What do you do sir?" - John Maynard Keynes

There are no sacred cows at iREIT or Dividend Kings. Wherever the fundamentals lead we always follow. That's the essence of disciplined financial science, the math behind retiring rich and staying rich in retirement.

Bottom Line: Berkshire Is A Wonderful "Buy And Hold Forever" Blue-Chip But Allianz Is A Far Better Buy Today

Both Berkshire and Allianz are amazing companies and over the long-term both could make you rich.

Company Berkshire Allianz BRK Wins ALIZY Wins
Yield 0.0% 5.1% 1
LT Growth Consensus 10.9% 6.0% 1
Total Return Potential 10.9% 11.1% 1
Risk-Adjusted Expected Return 7.6% 7.8% 1
Discount To Fair Value -3% -15% 1
DK Rating Hold Good Buy 1
Quality Score 80% 96% 1
Safety Score 92% 97% 1
Dependability Score 66% 100% 1
Long-Term Risk-Management Industry Percentile 47% 87% 1
Credit Rating AA Stable AA stable 1 1
30-Year Bankruptcy Risk 0.51% 0.51% 1 1
Dividend Growth Streak (Years) NA 2 1
Return On Capital (12-Months) NA NA 1 1
Return On Capital Industry Percentile NA NA 1 1
Return On Capital (13-Year Median) NA NA 1 1
Return On Capital (5-Year trend) NA NA 1 1
Sum 7 16

(Source: DK Research Terminal, FactSet)

But when it comes to key fundamentals such as safety and quality, yield, total return potential, and valuation, Allianz is the clear winner over Berkshire right now.

While no company is right for everyone, not even the mighty Berkshire, I think that two things are clear today.

  • Most people would do well to own Berkshire in their diversified and prudently risk-managed portfolios
  • Allianz is the far better buy today

This is the kind of careful analysis that smart long-term investors make when deciding which companies to buy and when.

Because if you focus on the five fundamentals that determine 97% of long-term investing success, you never have to pray for luck on Wall Street, you make your own.

  • risk-management (asset allocation)
  • safety and quality
  • yield
  • growth
  • valuation

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This article was written by

Dividend Sensei profile picture
93.93K Followers
Maximize your income with the world’s highest-quality dividend investments

Adam Galas is a co-founder of Wide Moat Research ("WMR"), a subscription-based publisher of financial information, serving over 5,000 investors around the world. WMR has a team of experienced multi-disciplined analysts covering all dividend categories, including REITs, MLPs, BDCs, and traditional C-Corps.


The WMR brands include: (1) The Intelligent REIT Investor (newsletter), (2) The Intelligent Dividend Investor (newsletter), (3) iREIT on Alpha (Seeking Alpha), and (4) The Dividend Kings (Seeking Alpha).


I'm a proud Army veteran and have seven years of experience as an analyst/investment writer for Dividend Kings, iREIT, The Intelligent Dividend Investor, The Motley Fool, Simply Safe Dividends, Seeking Alpha, and the Adam Mesh Trading Group. I'm proud to be one of the founders of The Dividend Kings, joining forces with Brad Thomas, Chuck Carnevale, and other leading income writers to offer the best premium service on Seeking Alpha's Market Place.


My goal is to help all people learn how to harness the awesome power of dividend growth investing to achieve their financial dreams and enrich their lives.


With 24 years of investing experience, I've learned what works and more importantly, what doesn't, when it comes to building long-term wealth and safe and dependable income streams in all economic and market conditions.


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Disclosure: I/we have a beneficial long position in the shares of ALIZY, BRK.B either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Dividend Kings owns ALIZY, and BRK.B in our portfolios.

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