Warren-Buffett-led Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) is known for holding sizable stakes in public equities such as Apple, American Express, Bank of America, Coca-Cola, and Chevron. But the bulk of Berkshire's value comes from its other assets, which include insurance companies, BNSF railroad, Berkshire Hathaway Energy, and a slew of retail, service, and manufacturing companies.
Exchange-traded funds (ETFs) that hold Berkshire Hathaway offer a way to tap into Buffett's investment empire while maintaining diversification. Berkshire Hathaway stock is a holding in many funds, including low-cost ETFs offered by investment management company Vanguard.
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Here are five Vanguard ETFs with exposure to Berkshire that may be worth buying now. But first, here's a look at why Berkshire is in a unique position heading into the new year.
Image source: Getty Images.
Investing against the current
In August, Berkshire became the first non-technology company to hit a $1 trillion market cap. But Berkshire has had a choppy few months since then, sporting a market cap of $977 billion at the time of this writing.
It's been a uniquely contrarian year for Berkshire. Buffett has sent several warning signals to investors by trimming or selling out of positions and raising cash -- indicating that Buffett and his team may view the broader market as generally overvalued.
The warning signs have grown even louder in recent months, as Berkshire didn't repurchase its own stock in a quarter for the first time since the third quarter of 2018. Berkshire's net cash position is at a record high, and its net stock sales year to date through the September quarter are their highest ever.
On paper, Berkshire is arguably the most pessimistic it has ever been. But that doesn't mean that buying the company is a bad idea. For starters, its $325 billion in cash and Treasury bills basically means that nearly a third of Berkshire's value is in cash. The total value of Berkshire's public equity holdings is just shy of $300 billion, so the rest of the company's worth is in other assets, like the insurance companies, railroad, and other businesses mentioned earlier.
Berkshire is a stable business with many advantages in today's relatively expensive market. It has the dry powder needed to load up on stocks or make acquisitions when it feels the valuations make sense. Its businesses are stable cash cows that tend to grow gradually over time. They aren't the kind of companies that can deliver rip-roaring growth, but they also have what it takes to endure an economic slowdown.
Some investors may want to buy Berkshire Hathaway stock instead of an ETF because it's already a fairly diversified company. However, investors wishing to pair Berkshire with other stocks may want to look at the following funds more closely.
Five Berkshire-heavy Vanguard ETFs
Given its size, Berkshire makes up a large share of the financial sector. It also tends to be included in value-focused funds. However, Berkshire is excluded from income-oriented funds because it doesn't pay dividends.
Buffett prefers to use excess capital to buy back stock instead of paying dividends because it creates more value for long-term investors. Given Berkshire's historical returns, Buffett has been massively correct in his decision not to pay a dividend on Berkshire stock.
ETF | Berkshire Hathaway Percentage of Fund (Class A and Class B Shares) | Holdings | Expense Ratio |
|---|---|---|---|
Vanguard Financials ETF (NYSEMKT:VFH) | 7.7% | 409 | 0.1% |
Vanguard Mega Cap Value ETF (NYSEMKT:MGV) | 4.5% | 136 | 0.07% |
Vanguard S&P 500 Value ETF (NYSEMKT:VOOV) | 4% | 437 | 0.1% |
Vanguard Value ETF (NYSEMKT:VTV) | 3.9% | 335 | 0.04% |
Vanguard S&P 500 ETF (NYSEMKT:VOO) | 1.7% | 504 | 0.03% |
Data source: Vanguard. Chart by author.
The Vanguard Financials ETF is a low-cost way to mirror the financial sector's performance. The fund has exposure to top diversified banks like JPMorgan Chase, payment processors like Visa, insurance companies, and more.
The Vanguard Mega Cap Value ETF, S&P 500 Value ETF, and Value ETF are all similar funds. The Mega Cap Value ETF concentrates a bit more on the largest companies, which is why it has a slightly higher weight in Berkshire than the other value-focused funds.
The best fund for you will depend on how much diversification you want. The Vanguard Value ETF has the lowest expense ratio of the value-focused funds at just 0.04%.
The fifth fund on the list is the Vanguard's S&P 500 index fund. With $1.37 trillion in net assets, the fund embodies low-cost investing at scale. The fund's size allows it to charge a mere 0.03% expense ratio, or just $3 for every $10,000 invested.
Berkshire is one of the largest holdings in the fund, but the sheer size of companies like Apple, Microsoft, and Nvidia means that even a near-$1 trillion market-cap company like Berkshire doesn't even crack 2% of the fund. This goes to show how top-heavy the S&P 500 has become, as well as how much its value has compounded over time.
Approach an investment in Berkshire in a way that's best for you
Investing in ETFs can be an excellent, hands-off way to put new capital to work in the stock market. By identifying ETFs that hold stocks you like, you can achieve diversification while also investing in companies you understand and believe in.
You can also consider a hybrid approach by buying Berkshire Hathaway stock and an ETF. That way, you can gain outsized exposure to Berkshire while still rounding it out with dozens, if not hundreds, of other top companies.
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Bank of America is an advertising partner of Motley Fool Money. American Express is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, Chevron, JPMorgan Chase, Microsoft, Nvidia, Vanguard Index Funds-Vanguard Value ETF, Vanguard S&P 500 ETF, and Visa. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
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