Berkshire Hathaway is the ultimate permanent holding — a $1.1 trillion conglomerate with $325B+ in cash, $370B+ in equity investments, and the largest insurance float in the world, trading at just 1.5x book value under a proven capital allocation succession plan.
Li Lu
Himalaya Capital
Est. ~4.4% of total portfolio
“Charlie taught me that it's far better to buy a wonderful business at a fair price than a fair business at a wonderful price. The key insight is that truly great businesses are rare, and when you find one, you should concentrate.”
The Business
- Berkshire Hathaway is a $1.1 trillion conglomerate founded by Warren Buffett and Charlie Munger, comprising 100+ wholly-owned operating businesses (BNSF Railway, Geico, Berkshire Hathaway Energy, Precision Castparts, See's Candies, Dairy Queen, and many more), a $370B+ public equity portfolio, and $325B+ in cash and treasury securities.
- The company generates approximately $47B in annual operating earnings and holds the largest insurance float in the world (~$170B+).
- Under new CEO Greg Abel, Berkshire continues its capital allocation framework: owning great businesses permanently, investing in public equities selectively, and accumulating cash when valuations are unattractive.
Why They Own It
“Charlie taught me that it's far better to buy a wonderful business at a fair price than a fair business at a wonderful price. The key insight is that truly great businesses are rare, and when you find one, you should concentrate.”
- Li Lu's 12.6% allocation to Berkshire Hathaway is deeply personal — this is the company built by his mentors Charlie Munger and Warren Buffett, the two people who shaped his entire investment philosophy. But the position is not sentimental; it is analytical.
- Berkshire at ~$748,000/share trades at roughly 1.5x book value, which historically has been the level at which Buffett himself has repurchased shares, signaling it represents fair-to-cheap valuation. The company holds $325B+ in cash and short-term treasuries, $370B+ in public equity investments (Apple, Coca-Cola, American Express, etc.), wholly-owned operating businesses generating $40B+ in operating earnings, and the largest insurance float in the world (~$170B+ of essentially free capital).
- For Li Lu, Berkshire represents the floor-price philosophy incarnate: a business where permanent capital loss is virtually impossible. Even if every operating business stopped growing, the cash pile alone represents ~$225,000 per Class A share — 30% of the stock price in liquid assets.
- The equity portfolio adds another ~$257,000 per share. The operating businesses contribute ~$28,000 per share in annual earnings.
- Under CEO Greg Abel, the capital allocation framework continues, with Abel recently investing $15M of his own salary in BRK stock. This is the quintessential Munger bet: a fortress balance sheet, diversified earnings streams, and a valuation that provides margin of safety even in adverse scenarios.
What the investor sees
Li Lu sees Berkshire as the lowest-risk way to compound capital at 10-12% annually — essentially an index fund of high-quality businesses with no management fee, no style drift, and a permanent capital structure. At 1.5x book value, the market gives zero premium for Berkshire's insurance float (~$170B of free capital), undervalues the operating businesses relative to what they would fetch in private transactions, and ignores the optionality of the $325B+ cash hoard. Buffett accumulated this cash because he found no investments meeting his criteria — but under Greg Abel, this represents dry powder for potentially the largest acquisitions in corporate history. The cash earns 4-5% in treasuries while waiting, generating $13-16B annually with zero risk.
Financial Snapshot
$371.4B (2024)
revenue
$89.0B (2024; includes investment gains); $47.4B operating earnings
net income
$1.08 trillion
market cap
N/A (conglomerate with diverse capital needs; measured by operating earnings + investment income)
free cash flow
16.1x GAAP (distorted by investment gains); ~23x on operating earnings
pe ratio
The Moat
- Insurance float: ~$170B+ of free capital that Berkshire gets paid to hold — the largest and most profitable float in the world
- Permanent capital structure: No redemptions, no margin calls, no fund gates — Berkshire can hold investments through any market downturn
- Brand as acquirer of choice: Private business owners seek out Berkshire as a buyer because of its reputation for preserving culture and not firing management — this gives Berkshire access to deals no PE firm can compete for
- Diversification across 100+ operating businesses: Energy, railroads, insurance, retail, manufacturing, services — no single business failure can materially impair the whole
- Cost of capital advantage: Berkshire's AAA-equivalent credit and float provide one of the lowest costs of capital of any company in the world
- Tax efficiency: Unrealized gains on equity portfolio ($200B+) benefit from tax deferral — effectively an interest-free loan from the government
What Could Go Wrong
Post-Buffett succession
Greg Abel is now CEO and has been running Berkshire Energy and overseeing non-insurance operations for years. Ted Weschler and Todd Combs manage ~$35B each in the equity portfolio. The decentralized operating model means most businesses run themselves. Abel recently bought $15M of BRK with his own salary — strong alignment signal.
Size constrains returns
At $1.1T, Berkshire is too large for small deals to move the needle. Only 'elephant-sized' acquisitions ($30B+) matter. However, the $325B cash hoard means Berkshire is uniquely positioned for a once-in-a-generation mega-acquisition during the next market downturn.
Apple concentration in equity portfolio
Apple represents ~25% of the equity portfolio (~$90B). While concentrated, Buffett has been trimming Apple over the past year, and the position is still profitable even after substantial selling.
Conglomerate discount persists
The market may never fully value Berkshire at the sum of its parts. However, this discount is relatively stable and is offset by Berkshire's ability to repurchase shares below intrinsic value.
Catalysts
- Major acquisition: $325B+ in cash positions Berkshire for the largest corporate acquisition in history during the next market dislocation
- Share buybacks: Abel has resumed buybacks; at current prices, each dollar of buyback increases per-share intrinsic value
- Interest income on cash: $325B earning 4-5% generates $13-16B annually — more profit than most S&P 500 companies produce in total
- Operating earnings growth: BNSF, Geico, and BHE all have pricing power and secular tailwinds (infrastructure, insurance hardening, renewable energy)
- Re-rating post-succession clarity: As Greg Abel proves himself, the 'Buffett premium' concern dissipates and the stock re-rates
In Their Own Words
“What really matters in investing is avoiding permanent loss of capital. If you can avoid the losers, the winners take care of themselves.”
“I owe everything to Charlie Munger. He didn't just teach me how to invest — he taught me how to think. The mental models, the multidisciplinary approach, the intellectual honesty — those are the foundations of everything I do.”