##Summary
- Berkshire is an Apple investment with a cash safety net.
- Berkshire's high proportion of cash is also not a bad situation considering the interest on government bonds.
- Due to the sluggish manufacturing PMI, there is room for short- to medium-term underperformance compared to the index.
No matter what anyone says, Berkshire Hathaway is the stock portfolio of the world's richest person, where most of Warren Buffett's assets are invested. Although some say that it is difficult to sustain the huge returns of the past due to its now so large scale, it is still a stock that is beating the market. Unless you're spending a lot of time studying stocks, is there any reason to make a different choice?
##Buffett with Apple
Berkshire Hathaway is also a good choice if you want to invest in Apple.
Berkshire Hathaway holdings (Source: https://www.gurufocus.com/)
Berkshire Hathaway is an Apple investment with a safety net of $157.2 billion. Moreover, it has a powerful brain in Warren Buffett who can distribute it to profitable companies.
Apple is overvalued relative to the market, and its stock price is also performing poorly compared to Berkshire. Let's add a comparison chart.
##Berkshire's Cash Reserve
There is an inevitable aspect to Buffett's holding cash. This is because cash reserves exceeding $150 billion are too large a sum to make investment decisions. Apple, which ranks first in market capitalization, has an average daily trading volume of about $10 billion. Even if about 10% of the trading volume of the company with the largest market capitalization is used for trading, the amount that can be traded is around $1 billion. Of course, if you participate in trading on that scale, it is clear that price fluctuations will become more serious. This excessively large amount of funds is a handicap in pursuing alpha, but for investors, such cash can also be an advantage. It isshare purchase. Berkshire does not have attractive investments (where large funds can be tied up for a long period of time) and conducts share repurchases when Berkshire's value falls. Individuals' cash holdings are often used to lower rates of return or as a meaningless ride, but Berkshire's divestment serves as a strong safety valve that prevents stock prices from falling too far. Moreover, now is a time when you can earn 5% even with short-term U.S. government bonds. Moreover, this is why you do not need to regret holding cash.
##Manufacturing slowdown
The graph below shows the U.S. ISM Manufacturing Purchasing Managers' Index (PMI) trend over the past two years. For reference, PMI is an index that combines five indicators, including new orders, production, employment, supplier transportation time, and inventory. A reading above 50 indicates expansion of the economy, while a reading below indicates contraction.
US ISM Manufacturing Purchasing Managers' Index (PMI) (Source: Investing.com)
As the name Purchasing Manager Index suggests, it is based on a survey of purchasing managers from more than 400 manufacturers in 19 industries, so each number is not an absolute standard for judgment.
However, the economy viewed by purchasing practitioners is trending downward starting in April 2021. The fact that it is still at a bad level is disappointing for Berkshire Hathaway, which has a large manufacturing portion.
Berkshire's manufacturing share based on EBIT is approximately 33%, the highest among sectors. It is difficult to say that the 33% impact is absolute, and we do not expect a decline in the stock price due to the slump in the manufacturing industry as it has a lot of cash assets, but it seems likely that it will underperform the S&P 500 in the short to medium term.
##conclusion
Although a slump in the manufacturing industry is expected, if you do not have the passion and ability to quickly adjust and distribute your portfolio, Holding Berkshire Hathaway long-term is still a good option. In the short term, individual stocks chosen by each person, and in the medium term, indexes such as S&P 500 or Nasdaq. It may be possible to surpass Berkshire's performance. However, from a long-term perspective, Berkshire can be seen as a great commission-free ETF with the safety net of a large amount of cash + the potential to beat the index at any time.