The last time Berkshire Hathaway’s Class B shares traded below $500, the S&P 500 was flirting with fresh highs and short‑term Treasury bills yielded north of 5%.
Now the stock has backed off about 10% from its May peak as Warren Buffett prepares to hand the CEO baton to Greg Abel at year‑end, erasing what Wall Street long called the “Buffett premium.”
For patient investors, that pullback begs the question of whether sub‑$500 represents a bargain or a value trap wrapped in a future without Buffett at the helm?
How Cheap Is Berkshire?
Berkshire changes hands these days for roughly 1.6 × book value, almost smack on its 10‑year average and well below the ~2.1 × multiple investors were willing to pay in the euphoric days of 2021
On a conventional P/E basis, Barron’s pegs the stock at 24 × forward earnings, nearly identical to the broader market.
That doesn’t shout screaming bargain but focusing on headline multiples misses two things most investors overlook, the first being GAAP distortions.
Accounting rules force Berkshire to mark its Apple stake to market each quarter, turning reported net income into a roller coaster.
Operating earnings are what Buffett cares about and they fell 14% in Q1, but largely because of wildfire claims and FX swings, not weak fundamentals.
Hidden asset values are another focus. Burlington Northern Santa Fe (BNSF) still sits on Berkshire’s books at the $44 billion purchase price from 2010. Rail analysts value a coast‑to‑coast operator north of $120 billion today, an invisible $76 billion cushion that book value won’t show.
Cash Mountain Nobody Discusses Correctly?
Headlines emphasize “$347 billion in cash,” but the discussion usually stops there. Dig deeper and you’ll discover about $275 billion is parked in T‑bills averaging just 100 days to maturity.
That means Berkshire is collecting roughly $14–15 billion in annual interest with virtually no duration risk, income that didn’t exist two years ago.
Barron’s calculated interest income soared 80 % in the first half of 2024, and it’s running even hotter in 2025. For context, BNSF earned $5.4 billion last year. In other words, “doing nothing” with the cash now throws off more profit than one of America’s largest railroads.
The best part is if the Fed cuts rates 100 basis points, Berkshire’s earnings power drops by just $2.8 billion, barely 3% of operating income. The cash is a yield enhancer.
Float Still Rising at 0% Cost
Berkshire’s insurance float climbed to $173 billion in Q1 and still costs the company virtually nothing to hold.
With short‑term rates elevated, that float is effectively a giant, free, variable‑rate loan from policyholders, a structural advantage no S&P 500 constituent can replicate at scale.
GEICO’s much‑needed turnaround is already visible with underwriting profit up 13 % despite heavy wildfire losses elsewhere in the insurance group.
If Ajit Jain’s telematics push keeps accident frequency in check, GEICO alone has the potential to add $2 billion in incremental annual earnings over the next two years.
Subsidiaries In Plain Sight
There’s talk of Berkshire using its war chest to acquire CSX resurfaced after Union Pacific and Norfolk Southern floated a transcontinental merger idea.
Whether a deal happens or not, the speculation underscores how inexpensive BNSF looks relative to peers trading near 13 × EBITDA.
Regulated utilities rarely make headlines but BHE’s rate‑base will likely top $160 billion by 2030, bigger than Duke or Dominion, and its offshore wind build‑out means regulated earnings could compound at high single digits without a penny of external capital.
Investors barely noticed Berkshire consolidated 100 % of Pilot’s numbers in 2024; volumes are choppy, but controlling stake gives Berkshire another inflation‑resistant cash generator in the real‑asset bucket.
Buybacks On The Runway
Berkshire hasn’t repurchased a share for three straight quarters because prices drifted above Buffett’s intrinsic‑value bogey.
Sub‑$500 brings the stock within 10% of many analysts’ conservative break‑up estimates ($535 on the low end).
Greg Abel reiterated at May’s meeting that management “came pretty close to spending $10 billion” earlier this year when the price dipped.
A renewed buyback program could emerge if the Buffett premium continues to deflate.
The Leadership Hand-Off
Buffett turning 95 in August naturally makes investors jittery but succession is clearer than it was even a year ago.
Abel will control capital allocation, Ajit Jain keeps the insurance fortress humming, and Ted Weschler and Todd Combs already manage $45 billion in public equities.
What is largely being overlooked is that Abel has run 92 % of Berkshire’s operating earnings for five years. The transition is already baked into the cake and the market is just acknowledging it in the share price.
What Has The Market Priced In?
What’s already been discounted is moderating interest income as Fed easing approaches and a leadership transition with perceived “Buffett brain‑drain” as well as slower Apple dividends after Berkshire trimmed its stake by $15 billion in 2024.
What may not yet have been priced in is any major acquisition that soaks up $100 billion‑plus of idle cash as well as a buyback re‑acceleration if shares hover near 1.4 × book.
In addition there’s upside from GEICO’s telematics and BHE’s rate‑base growth and optionality around rail consolidation.
Is Berkshire Hathaway Stock a Buy Under $500
Buying Berkshire below $500 isn’t a trade that will produce wealth fast but it’s got an AAA balance sheet, and a management team that reads Ben Franklin for fun. At 1.6 × book value, investors capture a $347 billion T‑bill float generating Treasury‑like safety with corporate‑bond‑like yields and a cash-rich insurance empire whose float costs less than zero.
In addition, investors get a collection of hard‑asset businesses (rail, energy, truck stops) that compound value at mid‑single‑digit rates and free‑out‑of‑the‑money call options on a blockbuster acquisition whenever Mr. Market has a mood swing.
Could shares slip into the $430s if rate‑cut fears spike or recession clouds gather? Absolutely. But history suggests Berkshire’s downside is cushioned by cash, float, and Buffett’s doctrine of buying back stock below intrinsic value.
For long‑term investors who prize safety over hype, Berkshire Hathaway under $500 still looks like a good deal.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.