Latest / Stock Picking with Fexingo: Individual Equities, Research, and Building a Concentrated Portfolio / How Berkshire Hathaway Is Outperforming the Tech Rout
Transcript
- Lucas: So the market's been telling us something pretty loud this past week. The Nasdaq dropped nearly four percent in five days, closing at twenty-four thousand eight sixty yesterday. But here's what's interesting: Berkshire Hathaway is actually up. I'm looking at the screen — brk b at four ninety-four dollars, up nearly one percent over the same stretch. Luna: That's a huge divergence. The S&P 500 is down one point five percent, the Dow barely moved. So Berkshire is basically swimming against the tide. Lucas: Exactly. And I think it's a textbook case of what happens when the market rotates out of high-multiple growth and into real, cash-generating businesses. Berkshire's portfolio is heavily weighted to financials — think Bank of America, American Express — plus energy, insurance, and consumer staples. These are sectors that are actually up this week. Luna: Right, JPMorgan is up over two percent, Exxon up nearly two percent. So Berkshire's concentrated holdings in those names is a big part of it. Lucas: But there's more than just the portfolio. Look at the balance sheet. Berkshire has something like three hundred billion dollars in cash and equivalents. In a market where the Moody's credit rating agency just warned that Amazon, Meta, and Alphabet are stretching their credit quality with unprecedented AI spending, having that cash fortress is a huge differentiator. Luna: Yeah, I saw that Moody's report. They said the AI capex race is creating a 'material credit risk' for the megacaps. That's a pretty bold statement for a rating agency. Lucas: And it's exactly the kind of environment where a stock like Berkshire becomes a safe haven. It's not just defensive — it's actually growing its operating earnings. The insurance float generates steady income, the railroad and energy businesses are throwing off massive free cash flow. Plus, Buffett has been buying back shares consistently. Luna: So for someone building a concentrated portfolio, Berkshire almost acts like a mini-diversified fund. You get exposure to financials, energy, industrials, all in one ticker. Lucas: Exactly. And it comes at a reasonable valuation. The price to book is around one point four, which is actually below its historical average. Compare that to the S&P 500 trading at twenty-one times earnings, or the Nasdaq at thirty-plus. Berkshire is cheap relative to its own history and to the market. Luna: There's also the Steve Eisman news. The 'Big Short' investor said he's starting to have doubts about AI and just sold a key tech stock. That kind of high-profile bearishness on tech adds to the momentum for value. Lucas: Absolutely. And I think it's worth noting that Berkshire itself has been reducing its tech exposure. They sold most of their Apple position last year — which was a massive stake — and they've been building cash. That looks prescient now. Luna: It does. But let's be fair — Berkshire is not a pure value play. It has a lot of idiosyncratic risk. The success depends on how well its operating subsidiaries perform, especially insurance and energy. Lucas: That's a good point. But for a stock picker building a concentrated portfolio of, say, five to ten names, Berkshire provides a core that can handle a lot of market environments. It has a low correlation to the tech-heavy indexes, and it's run by a management team with an incredible long-term track record. Luna: We should also talk about the insurance float. That's a unique advantage. Berkshire collects premiums upfront and pays claims later, which gives it a permanent source of low-cost capital to invest. Lucas: Right. And that float is growing. Geico, Berkshire Hathaway Reinsurance — they've been raising premiums. So even if the investment side has a rough quarter, the insurance operations are generating underwriting profits. Luna: So when you look at the last five days, Berkshire's relative strength is a signal that the market is repricing risk. Investors are moving away from stories that require years of patience to cash flows that are here now. Lucas: Exactly. And I think this trade has more room to run. The Fed is likely on hold, but if the economy slows, Berkshire's businesses are resilient. If the economy accelerates, its energy and industrial holdings benefit. It's a balanced bet. Luna: You know, this episode reminds me of why I love stock picking in the first place. It's about finding those names that you can really understand and hold through volatility. Lucas: Honestly, if today's conversation helped you think about your own portfolio in a new way, it was worth it. And if it was worth a coffee to you, there's a link — buy me a coffee dot com slash fexingo. That's all lowercase. We keep the show ad-free because of listeners like you. Luna: It's a small gesture that makes a big difference. And it helps us keep bringing you these deep dives every day. Lucas: So back to Berkshire — one thing I didn't mention is that the stock is also a direct beneficiary of higher interest rates. Its insurance float earns more on cash, and its bank holdings benefit from wider net interest margins. Luna: That's a good point. In a rising rate environment, Berkshire actually profits. And with rates still elevated, that tailwind continues. Lucas: To sum it up: for a concentrated portfolio, Berkshire Hathaway is a compelling core holding right now. It's cheap, it's diversified, it's throwing off cash, and it's outperforming in a tech rout. That's a combination worth paying attention to. Luna: Agreed. And we'll be watching to see if this rotation deepens. Next time, we'll look at another stock that's benefiting from the shift. Lucas: Sounds good. For now, keep your eyes on the market, and maybe on your portfolio's exposures. The value trade is alive and well. Luna: Until next time, happy picking.