Is it Better to Buy Berkshire or Brookfield Stock?

Investing in blue-chip stocks such as Berkshire Hathaway should help you generate market-beating gains in the long term.

Berkshire Hathaway (NYSE: BRK.B) and Brookfield Corp. (TSX: BN) own real assets that generate steady cash flows across market cycles. The two companies have investments across multiple sectors and are positioned to outpace the broader markets over time. But which stock between Berkshire and Brookfield is a better buy right now?

The bull case for Berkshire Hathaway stock

Valued at US$880 billion by market cap, Berkshire Hathaway is among the largest companies in the world. It has several business segments that include the following:

  • Geico: It is involved in underwriting private passenger automobile insurance.
  • The Berkshire Hathaway Reinsurance Group: It consists of underwriting excess-of-loss and quota-share as well as facultative reinsurance.
  • BNSF: It operates railroad systems in North America.
  • Energy: It includes regulated electric and gas utilities including power generation and distribution.
  • The McLane Company: It offers wholesale distribution of groceries and non-food items.
  • Manufacturing: It includes industrial and end-user products such as apparel.
  • Service and Retailing: It provides fractional aircraft ownership programs, electronic components distribution, and other retailing businesses such as auto dealerships.

Berkshire Hathaway is a popular stock on Wall Street primarily due to its chairman, Warren Buffett, who is among the greatest stock market investors. Buffett, also known as the Oracle of Omaha, primarily looks to acquire reasonably priced companies that are well-run and profitable. These companies are then integrated into Berkshire Hathaway and are generally led by existing management teams.

Additionally, Berkshire Hathaway owns a portfolio of publicly listed stocks, including Apple, Coca-Cola, and American Express. In the last 20 years, Berkshire Hathaway has returned close to 600% to shareholders, which is in line with the dividend-adjusted gains of the S&P 500 index.

Priced at 21.5 times forward earnings, Berkshire stock is quite cheap, given analysts expect adjusted earnings to surge by 23.3% annually in the next five years. Analysts remain bullish and expect shares to surge over 20% in the next 12 months.

Is Brookfield Corp. stock a good buy?

Valued at a market cap of $94 billion, Brookfield is a well-diversified company. Its business segments include the following:

  • Renewable Power and Transition: It is involved in the provision of hydro, wind, utility-scale solar, distributed generation, and storage.
  • Infrastructure: It operates assets in utilities, transport, midstream, and data centres.
  • Private Equity: It acquires businesses with high barriers to entry, offering a competitive moat.
  • Real Estate: The segment investments in real estate properties globally.
  • Credit and Insurance: This business offers investment products.

Brookfield ended the first quarter (Q1) with a net income of US$519 million, while its net income in the last 12 months was much higher at US$5.2 billion. Its distributable earnings before realizations were US$1 billion in Q1 and US$4.3 billion in the past year.

Brookfield explained that its asset management business experienced strong fundraising momentum and successful capital deployment across its flagship funds. Its wealth solutions segment delivered a significant increase in earnings due to strong investment performance and organic growth.

Brookfield’s operating businesses generated stable cash flows in Q1, supported by resilient earnings across renewable power, infrastructure, and private equity.

Priced at 10 times forward earnings, Brookfield stock is really cheap, given its earnings are forecast to rise by 10% in 2024 and 24.8% in 2025.

The Foolish takeaway

Both Berkshire and Brookfield are solid long-term investment options in 2024. Investors may consider allocating a portion of their equity capital to these two stocks and benefit from outsized gains going forward.

American Express is an advertising partner of The Ascent, a Motley Fool company. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Apple, Berkshire Hathaway, Brookfield, and Brookfield Corporation. The Motley Fool has a disclosure policy.

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