BRK-B Berkshire Hathaway
Unbreakable balance sheet, mediocre ROE: at 1.5x book you pay for the cash's optionality, not the returns.
The story
Berkshire is a fortress conglomerate: an insurance float engine, BNSF, a regulated utility arm (BHE), and wholly owned manufacturing and retail businesses, all sitting on a huge cash and Treasury pile with almost no holding-company leverage. Reported ROE swings with mark-to-market equity gains. Trailing 9.4% (67.3B on 717B of book) fits a through-the-cycle return of roughly 10%, held down by the large low-yielding cash balance and the utility drag. Balance-sheet quality is unmatched, but insurance underwriting is near a soft-market peak and the post-Buffett capital-allocation transition is still being tested.
Nothing material has changed since the 2026-09-29 take: trailing ROE of 9.4% confirms a normalized 10%, only slightly above an ~9.1% cost of equity. Book compounds about 7% near term from retained earnings and interest on the cash pile, then fades to 4.5%, below the risk-free rate. Low beta and near-zero failure risk reflect minimal leverage and diversified cash flows.
Value drivers
| Return on equity (normalized) | 10.0% |
| Book-value growth (Y1) | 7.0% |
| Terminal book growth | 4.5% |
| Beta | 0.85 |
| Failure probability | 0.3% |
| Cost of equity | 9.1% |
Valuation bridge
| PV of excess returns | 52.63B |
| PV of terminal excess | 102.44B |
| Equity value | 869.86B |
| ÷ shares → per share | $406.34 |
Projected excess returns on equity
| Yr | Book equity | ROE | Excess return | PV |
|---|---|---|---|---|
| 1 | 717.42B | 10.0% | 6.44B | 5.90B |
| 2 | 767.64B | 10.0% | 6.89B | 5.79B |
| 3 | 819.24B | 10.0% | 7.36B | 5.66B |
| 4 | 872.04B | 10.0% | 7.83B | 5.53B |
| 5 | 925.81B | 10.0% | 8.31B | 5.38B |
| 6 | 980.33B | 10.0% | 8.80B | 5.22B |
| 7 | 1.04T | 10.0% | 9.30B | 5.05B |
| 8 | 1.09T | 10.0% | 9.79B | 4.88B |
| 9 | 1.15T | 10.0% | 10.29B | 4.70B |
| 10 | 1.20T | 10.0% | 10.78B | 4.51B |
Key risks
- Hundreds of billions in cash dilute ROE for years if large deals stay unavailable
- Insurance underwriting margins mean-revert from cyclical highs, and the company carries catastrophe exposure (wildfire liability at PacifiCorp)
- Post-Buffett succession weakens the capital-allocation edge and the reputation that sources private deals
Catalysts
- A large acquisition or accelerated buybacks below intrinsic value, putting idle cash to work
- An equity market drawdown that lets Berkshire buy assets cheaply, lifting forward ROE