Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) has been one of the more interesting stock market stories of 2025. When the S&P 500 briefly plunged into bear market territory in April after the president's reciprocal tariff announcements, Berkshire held up quite well. In fact, Berkshire's stock reached a fresh all-time high a few weeks later and as of early May was one of the best-performing large cap stocks in the market.

However, at Berkshire Hathaway's annual meeting, legendary investor and CEO Warren Buffett dropped a bombshell on investors and announced that he intends to step down at the end of the year. In just over a month since that time, Berkshire has lost more than 10% of its market value.

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Historically, a 10% correction in Berkshire Hathaway stock has been an excellent time to buy. However, this time looks a little different. For one thing, even after falling 10%, Berkshire is still beating the S&P 500 over the past year. Second, is Berkshire a good buy even without Warren Buffet?

There are two things to unpack here:

• Can Berkshire still be a great investment in the post-Warren Buffett era?
• With a valuation of more than $1 trillion, even after a 10% decline, is Berkshire attractively valued as a business?

To be sure, these are somewhat a matter of opinion. But let's try to answer both of these questions.

What changes when Buffett steps down?

First, it's important to acknowledge that there's a lot that won't change when Buffett steps down. Just to name a few key points:

• Each of Berkshire's subsidiary businesses has its own management team, and there's very little oversight from Berkshire's corporate office.
• After Buffett steps down, new CEO Greg Abel will still oversee the company's non-insurance operations, and Vice Chairman Ajit Jain will still preside over the insurance businesses.
• Investment managers Ted Weschler and Todd Combs will still help allocate money in the stock portfolio.
• Buffett is planning to remain in an executive chairman role, so he still has significant influence.

Arguably, the biggest changes will be that Greg Abel, not Buffett, will have final say over what the company does with its nearly $350 billion cash stockpile, and Buffett won't be picking stocks in the portfolio.

However, I'd push back on the fact that these will be major changes. Abel knows Buffett's capital deployment strategies better than anyone and will use the same general investment framework in place now. And with the stock portfolio, Weschler and Combs have established an excellent track record. In fact, one of them was initially responsible for Berkshire's Apple (NASDAQ: AAPL) investment -- its most successful of all time.

Berkshire's valuation (short version)

There are three main parts of Berkshire Hathaway: its operating businesses, its stock portfolio, and its cash. The latter two are very straightforward to value.

As of the latest information, Berkshire has about $348 billion in cash and short-term investments, and its stock portfolio has a market value of $279.4 billion. Subtracting these from its market cap of $1.049 trillion shows that the company's operating businesses are valued at $421.6 billion.

Over the past four quarters, excluding investment income, Berkshire's operating profit has been about $33 billion. This means that Berkshire's businesses are trading for an exceptionally low valuation of less than 13 times earnings despite being a largely recession-resistant collection of companies with reliable cash flow.

Of course, this valuation is a bit of an oversimplification. Berkshire's subsidiaries are a diverse collection of different industries, growth rates, and business dynamics, and looking at the price-to-earnings (P/E) multiple for any investment is just one piece of the valuation puzzle. But the point is that despite its trillion-dollar valuation, Berkshire isn't as expensive of a stock as you might assume.

The bottom line

At a share price of about $488 as I'm writing this, Berkshire isn't as attractive as it was a year ago when its share price was 20% lower. But there are some good reasons for the strong performance, and the reality is that the business isn't going to change as much as you might think after Buffett steps down, and a 11% decline in the stock seems to be a bit of an overreaction. After all, Buffett turns 95 this year, so although the announcement was unexpected, the fact that he won't be at the helm much longer really shouldn't be a surprise.

Berkshire Hathaway is one of my largest stock investments and one I've added to many times over the decade or so I've held it. I have absolutely no plans to sell a single share, and although I have no clue what Berkshire's stock price will do over the coming weeks or months, there's a solid case to be made that this is a buying opportunity for long-term investors.

Should you invest $1,000 in Berkshire Hathaway right now?

Before you buy stock in Berkshire Hathaway, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Berkshire Hathaway wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $657,871!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $875,479!*

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See the 10 stocks »

*Stock Advisor returns as of June 9, 2025

Matt Frankel has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway. The Motley Fool has a disclosure policy.

What's the hottest mega-cap stock on the market right now? Palantir Technologies (NASDAQ: PLTR). Shares of the artificial intelligence (AI)-powered software provider have skyrocketed more than 70% year to date. No other stock with a market cap of at least $200 billion has delivered anywhere close to that gain.

While many investors have hopped aboard the Palantir bandwagon, Warren Buffett isn't one of them. Don't expect the multi-billionaire to become a fan of the stock anytime soon, either. Here are three reasons why Buffett wouldn't touch Palantir stock with a 10-foot pole.

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1. Palantir isn't in Buffett's wheelhouse

I seriously doubt that Buffett has even looked at Palantir's financials. Why? The company's business isn't in Buffett's wheelhouse.

The legendary investor was asked at Berkshire Hathaway's annual shareholder meeting last month if he anticipated being able to put the conglomerate's hefty cash stockpile to use soon. Buffett replied that he'd be willing to invest $100 billion in a company if it met several criteria. First on the list was that he understands the business.

Granted, Berkshire's portfolio has included software companies in the past. Snowflake is a great example. However, CNBC noted shortly after Berkshire invested $800 million in the AI cloud software provider, "It's widely speculated that Buffett lieutenants Todd Combs and Ted Weschler orchestrated the Snowflake bet." I think it's a safe bet that this take is correct.

Buffett has readily acknowledged that he doesn't understand AI. I suspect Palantir's AI-focused business is enough reason by itself for the legendary investor to avoid buying any shares.

2. Buffett couldn't reasonably estimate Palantir's earnings growth

Let's suppose, though, that Buffett didn't shy away from investing in Palantir because of its business. I still don't think he would buy the stock for another critical reason: He couldn't reasonably estimate the company's long-term earnings growth.

Buffett wrote to Berkshire Hathaway shareholders in 2014 that his first step in evaluating a stock (or business) he's considering buying is to try to estimate its future earnings for at least the next five years. He stated, "If, however, we lack the ability to estimate future earnings -- which is usually the case -- we simply move on to other prospects."

I seriously doubt that Buffett would be able to project Palantir's earnings growth because so much of the company's business stems from U.S. government contracts. How much federal money Palantir might receive depends in large part on which way the political winds are blowing over the next few years. Buffett's nickname is the "Oracle of Omaha," but even he probably wouldn't try to predict what will happen in Washington, D.C.

3. Buffett would find Palantir's valuation shocking

Buffett studied under Benjamin Graham, who is widely recognized as "the father of value investing." Although Buffett isn't as much a purist value investor now as he was in the past, he still looks closely at stock valuations before investing.

I'd bet that Buffett would find Palantir's valuation shocking. Actually, I think many investors would find it shocking. We're talking about a stock that trades at roughly 103.9 times trailing 12-month sales and more than 238 times forward earnings.

The only way those metrics would be justifiable is if Palantir were generating truly spectacular growth. To be sure, the company is growing rapidly -- 39% year over year in the first quarter of 2025. But is this growth rate sustainable? Probably not. Palantir's own revenue guidance for full-year 2025 reflects expected somewhat slower growth of around 36%. The consensus Wall Street estimate is for even more of a slowdown in revenue growth next year.

Could I be wrong that Buffett wouldn't touch Palantir stock with a 10-foot pole? Maybe. But with the AI software company's stratospheric valuation, I'd be comfortable making it a 20-foot pole.

Should you invest $1,000 in Palantir Technologies right now?

Before you buy stock in Palantir Technologies, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $669,517!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $868,615!*

Now, it’s worth noting Stock Advisor’s total average return is 792% — a market-crushing outperformance compared to 173% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 2, 2025

Keith Speights has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway, Palantir Technologies, and Snowflake. The Motley Fool has a disclosure policy.

Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) is one of the most successful companies in modern history. Its CEO, Warren Buffett, is a Wall Street legend who has been given the nickname "the Oracle of Omaha." If you are an investor, it's highly likely that you know all about Buffett and the company he runs. But do you know about Markel Group (NYSE: MKL)?

What does Berkshire Hathaway do?

Because of its large insurance operations, Berkshire Hathaway usually gets placed in the finance sector. That's not a bad classification for the company, but it doesn't do justice to the business at all. That's because Berkshire Hathaway is actually a widely diversified conglomerate. The collection of businesses under the Berkshire Hathaway umbrella ranges from auto sales to retail to specialty parts manufacturing. And it has a whole lot in between -- its list of subsidiaries includes over 180 companies.

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Even the insurance operations are used in a slightly different manner than they are at most other insurers. The float, which arises because insurance premiums get paid up front while claims get paid in the future, is used to buy stocks like Coca-Cola, American Express, and Chevron. The diversity in the list of stock investments is just as wide as the diversity in Berkshire Hathaway's owned businesses.

Investors buying Berkshire Hathaway are really investing alongside Warren Buffett. But at the end of 2025, Buffett is retiring from the $1 trillion market cap company he basically created via his unique investment approach. His hand-picked successor, Greg Abel, will likely continue to use a similar approach to that of his mentor Buffett, buying well-run companies while they are attractively priced and then holding on for the long term to benefit from the business' growth over time. But there's no question that Berkshire Hathaway won't be exactly the same in the future as it has been in the past.

What does Markel Group do?

Markel Group, with a market cap of around $25 billion, is a much smaller business than Berkshire Hathaway. But it doesn't pull any punches when it describes its business, making frequent references to Berkshire Hathaway. It also uses the same exact model, of an insurance company that directly owns companies and invests in publicly traded stocks (including Home Depot, Visa, and Deere).

Interestingly, the stock performance of Markel Group hasn't been as strong as that of Berkshire Hathaway or the S&P 500 index (SNPINDEX: ^GSPC) since the 2020 bear market. But Markel's management has been working to shake things up so it can get back to its historical performance, which was actually better than that of Berkshire Hathaway for many years.

This is where the really interesting comparison comes up. Berkshire Hathaway is at the start of a management shake-up. Markel Group is nearer the end of such a shake-up. Berkshire Hathaway's new leader is taking over a company so large that it requires very large changes to affect performance. Markel Group is still small enough that improving the business won't require massive changes. In some ways, and from a big-picture perspective, it sounds like Markel Group is in a better position as a business right now.

Trade down, but perhaps only in size

The world will never see another Warren Buffett because he is a unique individual. But his broad investment approach can be roughly mimicked. Mimicking Buffett is basically what Wall Street wants Greg Abel's job to be when he takes over as CEO of Berkshire Hathaway at the end of 2025. Only he's going to have to do it within the confines of a gigantic company, which means it will be a massive task.

Markel Group has been mimicking Buffett for years. While the company seemingly lost its way to some extent over the last five years, it is working to get back on track. Given the relatively small size of the business, that shouldn't be nearly as large a job as what Greg Abel is dealing with. If you like Berkshire Hathaway, now could be a good time to start looking at Markel Group, where imitation has long been a high form of flattery to Warren Buffett.

Should you invest $1,000 in Markel Group right now?

Before you buy stock in Markel Group, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Markel Group wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $669,517!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $868,615!*

Now, it’s worth noting Stock Advisor’s total average return is 792% — a market-crushing outperformance compared to 173% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 2, 2025

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, Chevron, Deere & Company, Home Depot, Markel Group, and Visa. The Motley Fool has a disclosure policy.

Though Apple has been Berkshire Hathaway's (NYSE: BRK.A) (NYSE: BRK.B) top holding for several years, Warren Buffett has historically avoided tech stocks.

The renowned value investor has said that he can't forecast earnings for tech companies as they are less predictable, due in part to the changeable nature of technology, than other sectors. Buffett has historically preferred to invest in sectors like insurance, banking, utilities, energy, and consumer staples that have predictable cash flows, and whose industries don't change much over time.

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Based on that philosophy, it's not a surprise that Buffett has mostly avoided artificial intelligence (AI) stocks. However, there are some that fit in well with his approach to investing -- buying companies with sustainable competitive advantages at attractive valuations.

Keep reading to see two stocks that fit the bill.

1. Alphabet

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) has one of the strongest economic moats in business history.

Google has had more than 90% market share in the web search industry for the last two decades. The brand is synonymous with search, and underpins Alphabet's larger, highly profitable tech empire that includes products like YouTube, Google Cloud, the Chrome web browser, and "moonshots" like the Waymo autonomous vehicle program.

Google Search has now reached a revenue run rate of $200 billion, and Google Services, of which search makes up most of its business, has an operating margin of more than 40%.

Alphabet is also still delivering steady growth with revenue up 12% in the first quarter.

You might think that a company like Alphabet with evident competitive advantages, solid growth, and massive profits would trade at a premium valuation, but that's not the case. Alphabet currently trades at a price-to-earnings ratio of just 18.6, a substantial discount to the S&P 500.

There are two primary reasons for the discount in valuation.

First, investors are fearful that the company could get broken up or face a substantial fine or a related punishment as it's been found to have a monopoly in both search and adtech. Separately, Alphabet also seems to be trading at a discount because of the risk that its search empire could be disrupted by an AI chatbot like ChatGPT or Perplexity.

While those are risks for Alphabet, shares have long traded at a modest valuation, meaning investors have historically underestimated the stock. Given that, investors may want to borrow from Buffett's mentality and buy Alphabet stock.

2. Taiwan Semiconductor Manufacturing

Berkshire Hathaway invested in Taiwan Semiconductor Manufacturing (NYSE: TSM) in 2022, buying $4.1 billion of the stock, but it sold out of that position completely just two quarters later. It wasn't clear why. It could have been because of the risk of an invasion by China into Taiwan.

Like Alphabet, Taiwan Semiconductor (also known as TSMC) has one of the strongest economic moats in the business world.

The company is the leading third-party semiconductor manufacturer with a market share of more than 50% in contract chips and more than 90% of advanced chips that are crucial for AI.

TSMC is the company that Apple, Nvidia, AMD, Broadcom, and other top semiconductor and tech companies turn to to manufacture their chips. In the first quarter, advanced chip technologies accounted for 73% of its total wafer revenue.

Its technological lead in a highly technical industry with high capital expenditures, and its customer relationships, give the company a significant competitive advantage. TSMC is also growing quickly, with revenue up 35% in the first quarter to $25.5 billion, and its operating margin improved to 48.5%, showing the company has significant pricing power.

Like Alphabet, TSMC is also cheaper than you'd expect for a company that's so dominant. The stock currently trades at a price-to-earnings ratio of 24, which is an excellent valuation for a business growing as fast as TSMC, and one that is a linchpin in the artificial intelligence boom.

It may never be clear why Berkshire Hathaway sold TSMC, but it's not surprising that Buffett's conglomerate bought it. In many ways, it looks like a classic Buffett stock.

Should you invest $1,000 in Taiwan Semiconductor Manufacturing right now?

Before you buy stock in Taiwan Semiconductor Manufacturing, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $669,517!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $868,615!*

Now, it’s worth noting Stock Advisor’s total average return is 792% — a market-crushing outperformance compared to 171% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 2, 2025

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Jeremy Bowman has positions in Advanced Micro Devices, Broadcom, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Apple, Berkshire Hathaway, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

Warren Buffett has proven his ability to deliver market-beating gains, and thanks to this, build wealth over the years. The billionaire investor, at the helm of Berkshire Hathaway, posted a 19.9% compounded annual increase over nearly 60 years -- and that's as the S&P 500 index recorded a 10.4% such gain. All of this helped his portfolio reach $258 billion as of the closing of the most recent quarter.

Though Buffett's biggest holding is Apple, the billionaire generally doesn't invest in technology stocks, so you might not think of turning to this top investor for inspiration when shopping for artificial intelligence (AI) players. But here's some good news: We actually can use some of Buffett's investing principles to identify smart buys in any industry.

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Here, I'll consider two elements that consistently drive Buffett's investment decisions, and these are valuation and competitive advantage. He aims to get in on stocks at a cheap or reasonable level, and he favors stocks that have what it takes to stay ahead of rivals over time. Let's check out two Buffett-style AI stocks that are winning in both of these areas -- and could build long-term wealth.

1. Alphabet

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is a company that you probably have some interaction with on a daily basis. The company owns Google Search, the world's most popular search engine with about 90% market share -- and this business has driven Alphabet's revenue and net income into the billions of dollars. This is the result of advertisers paying to promote their products and services across the Google platform in order to reach us.

This search business has a solid moat, or competitive advantage, thanks to its performance and position as part of our daily routine -- when we don't know something, we don't just search for it, we "Google it." So, as long as Google Search continues to offer us the performance we expect, it's likely to maintain its leadership.

And here's how Alphabet is ensuring that happens: The company has invested heavily in AI, even developing its own large language model (LLM), Gemini, to improve and expand the capabilities of Google Search. This should please users, and as a result, keep advertisers coming back and potentially even spending more.

On top of this, the AI investment is helping Alphabet's Google Cloud business deliver double-digit revenue gains quarter after quarter. Google Cloud sells various AI products and services to customers, and demand is high as the AI boom continues.

Along with this solid competitive advantage, Alphabet offers a valuation that might even please the bargain-hunting Buffett. Alphabet, trading for 18x forward earnings estimates, is the cheapest of the Magnificent Seven tech stocks by this measure.

2. Nvidia

Nvidia (NASDAQ: NVDA) is clearly on every AI investor's radar screen. The company dominates the AI chip market, and this has helped it generate soaring earnings over the past few years -- with revenue and profit reaching record levels. But this stock doesn't look like it's in a bubble ready to burst. The company's solid reputation for excellence, along with its commitment to innovation, represents a moat. Nvidia aims to launch new AI chip updates on an annual basis, offering rivals little room to jump ahead.

And here's something else Buffett would like: the quality of Nvidia's leadership. Jensen Huang founded Nvidia more than 30 years ago and has successfully guided the company ever since. He's known for his resourcefulness, rapidly finding solutions to problems, and commitment to keeping Nvidia ahead of the pack.

Strong management is crucial for a company's long-term success, and Buffett has recognized the importance of this to him. "When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever," he wrote in his 1988 letter to shareholders.

Now, let's look at valuation. Nvidia isn't the cheapest AI stock around, but after recent declines across the sector, valuation has come down -- and today, it's at a very reasonable level considering the company's AI prospects. The stock trades for 31x forward earnings estimates, down from 50x earlier this year.

So, right now, Nvidia's moat, leadership, and reasonable price make it a Buffett-style stock that could help investors build significant wealth over the long term.

Should you invest $1,000 in Nvidia right now?

Before you buy stock in Nvidia, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $651,049!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $828,224!*

Now, it’s worth noting Stock Advisor’s total average return is 979% — a market-crushing outperformance compared to 171% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 2, 2025

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Apple, Berkshire Hathaway, and Nvidia. The Motley Fool has a disclosure policy.

Investors often gravitate to value stocks for their reliability and reasonable valuations.

Amid volatility in 2025, value stocks like Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), Allegion (NYSE: ALLE), and American Electric Power (NASDAQ: AEP) are all outperforming the benchmark S&P 500 (SNPINDEX: ^GSPC). But buying a stock just because it is doing well in the short term is a great way to lose your shirt.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Here's why all three value stocks have what it takes to be excellent long-term investments and could be worth buying now.

Berkshire's competitive advantages are built to last

Daniel Foelber (Berkshire Hathaway): Berkshire Hathaway is up 10.4% year to date (YTD) at the time of this writing -- handily outperforming the S&P 500's slight YTD decline.

Warren Buffett grew Berkshire into a company with a market cap of over $1 trillion. And I think Greg Abel, who is set to become the new CEO of Berkshire at the end of 2025, can take Berkshire far beyond a $2 trillion market cap and outperform the S&P 500 in the process.

Berkshire has numerous advantages that position it to thrive over the long term. The company has a portfolio of top dividend-paying stocks like Apple, American Express, Coca-Cola, Bank of America, and Chevron. It also has a massive cash position that it can use to pounce on investment opportunities. But the most valuable jewels in Berkshire's crown are its controlled assets.

Berkshire has been shifting its focus away from public equities toward its controlled businesses by growing its insurance businesses, Berkshire Hathaway Energy, BNSF railroad, and its various manufacturing, services, and retail segments. Combined, the value of Berkshire's controlled companies is worth much more than its public equity portfolio.

The controlled companies generate operating earnings, which Berkshire can park in cash or Treasury Bills, use to buy public stock, or reinvest back into its controlled businesses. And because Berkshire doesn't pay a dividend and only buys its stock when it deems it a bargain, the company is left with plenty of extra cash to put to work in its top ideas.

Berkshire earns insurance investment income on its float, which is the sum of premiums collected that haven't been paid in claims. Buffett often refers to this investment income as "free money," since Berkshire earns a return on the float. The float has gradually grown, ballooning to $173 billion as of March 31. Even if Berkshire simply invested the float in a risk-free asset yielding something like 4%, that would still be around $7 billion a year in "free" money. The float is just one of many ways Berkshire is well-positioned to compound its operating earnings for years to come.

Add it all up, and Berkshire has plenty of levers to pull to generate value and reward patient investors.

This company is helping keep America safe

Lee Samaha (Allegion): This doors-and-locks security company's stock is up 8.6% in 2025, compared to a slight decline for the S&P 500. This move highlights the business' underlying attractiveness and potential for long-term growth. Allegion's long-term development has several key drivers, including the opportunity to grow sales via the convergence of electronic and mechanical security products, the growing importance of safety and security (notably in the institutional sector), and the opportunity to continue consolidating a highly fragmented industry.

The increasing use of web-enabled electronics and services in locks and doors creates substantially more value for building owners because it allows them to monitor and control who has access to which areas, provides valuable data on workflows, and improves convenience.

The need for such features will only increase as urbanization trends create greater population density in cities, a statistic often linked to increased crime. As for industry consolidation, its key rival, Sweden's Assa Abloy, is a serial acquirer, and Allegion itself expects mergers and acquisitions to contribute 3% of its total long-term growth rate of above 7%.

Management expects the revenue growth rate to drop to double-digit growth in earnings. Wall Street analysts expect $8.42 in earnings per share in 2026 with $675 million in free cash flow (FCF), putting Allegion on 16.7 times earnings and 18 times FCF -- excellent valuations for a company with double-digit earnings growth prospects.

Plug American Electric Power into your portfolio and watch the passive income surge

Scott Levine (American Electric Power): While the S&P 500 has struggled to stay in positive territory, utility stock American Electric Power has charged considerably higher since the start of the year. As of this writing, shares have climbed more than 11% while the S&P 500 is down 1.3%. Despite its climb, the stock still sports an inexpensive valuation, appealing to those looking for a bargain. Besides value investors, those seeking passive income will also find their interests amped up with the prospect of owning the stock and its 3.7% forward-yielding dividend.

From its 4% year-to-date rise in February to the 17% year-to-date plunge in April, the S&P 500 has been on a roller coaster. During this turmoil, investors have sought the safety of rock-solid investments that represent minimal risk -- stocks like American Electric Power.

Because the company primarily operates as a regulated utility, it doesn't enjoy the freedom of raising rates when it wants. However, it guarantees certain rates of return. This low-risk business model may not spark joy in growth investors, but for those seeking conservative investments, it works just fine. Moreover, it lends credibility to management's target of providing an annual 10% to 12% total shareholder return, based on earnings-per-share growth of 6% to 8% and a dividend that yields about 4%.

With a lack of clarity regarding President Donald Trump's trade policy and geopolitical tensions continuing to run high, market volatility seems likely to continue to rattle the market's nerves for the foreseeable future, leading investors to the safety of utility stocks like American Electric Power.

With its stock trading at 8.8 times operating cash flow -- a discount to its five-year average cash flow multiple of 9.2 -- now looks like a good time to click the buy button on American Electric Power.

Should you invest $1,000 in Berkshire Hathaway right now?

Before you buy stock in Berkshire Hathaway, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Berkshire Hathaway wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $651,049!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $828,224!*

Now, it’s worth noting Stock Advisor’s total average return is 979% — a market-crushing outperformance compared to 171% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 2, 2025

American Express is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Daniel Foelber has no position in any of the stocks mentioned. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, and Chevron. The Motley Fool has a disclosure policy.

One of the things that makes Warren Buffett a widely admired investor is his willingness to share how he does it. Buffett has been a student of the market since his first stock purchase more than 80 years ago. He shares mistakes made and lessons learned every year in his letter to Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) shareholders and at the annual shareholder meeting.

Investors also gain insights into his and his team's investments through Securities and Exchange Commission filings disclosing Berkshire's portfolio changes.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

While Buffett has been a net seller of stocks the past few years, he still oversees a portfolio worth $281 billion as of this writing. And nearly half of that is invested in just three exceptional stocks.

1. Apple (22% of portfolio value)

Buffett first bought shares of Apple (NASDAQ: AAPL) in 2016 when it traded at a valuation too low to ignore. Buffett saw the powerful moat created by the iPhone, locking hundreds of millions of consumers into the Apple ecosystem, and Berkshire Hathaway poured tens of billions of dollars into the stock duringthe next couple of years. At one point, Apple accounted for more than half of Berkshire's marketable equity portfolio. After selling a significant chunk in 2024, it now accounts for 22% of the portfolio.

As mentioned, Apple benefits from a wide competitive moat thanks to the success of its iPhone. Apple's iPhone sales topped $200 billion in each of the past three years, and sales are on track to grow in 2025. The iPhone is the center of Apple's growing ecosystem of devices and services, helping the rest of the business grow.

The services segment is a particularly bright spot for Apple, currently boasting a $100 billion annual run rate. Apple's services are significantly higher margin sources of revenue than its devices. As one of the fastest-growing segments of the business, Apple's overall profit margins are expanding as a result. When combined with Apple's huge share repurchase program, Apple is capable of producing meaningful growth in earnings per share.

Apple faces some headwinds, though. First of all, it's in the crosshairs of the tariffs planned by the Trump administration. Its supply chain relies heavily on China and Taiwan. As a result, its costs could increase and it may have to pass those expenses on to consumers. That could dent its device sales.

Additionally, Apple has been slow to develop competitive artificial intelligence services. It risks losing customers looking for more AI integrated capabilities from their phones and services. Apple customers tend to be locked into the ecosystem, which helps minimize that risk.

Apple stock has fallen from its late-2024 all-time high, trading more than 20% below its peak. At its current price, the stock's valuation is about 28 times forward earnings. While Apple isn't the fast grower it once was, it holds a lot of potential to unlock value with AI services in the future while its iPhone and services businesses remain rock solid today. As such, it looks like a fair price to pay for the tech giant.

2. American Express (16%)

American Express (NYSE: AXP) is a longtime holding for Buffett. He put about $1.3 billion into the stock in the 1990s and hasn't touched it since. Today, those shares are worth nearly $45 billion.

Amex separates itself from other credit card companies by operating as both the card issuer and as the payments network. Most issuing banks partner with Visa or Mastercard to remit payments to vendors from customer accounts. Doing both allows Amex to exercise more control over the business and capture more of the economics of card payments. To that end, it's done extremely well, commanding higher interchange fees from businesses by attracting affluent households to its high-fee products.

Amex has successfully raised the fees on its cards during the past few years. It reported an 18% year-over-year increase in net card fees during the first quarter, while its customers spent just 6% more compared to the first quarter of 2024. That said, the fees collected from processing payments is still its biggest source of revenue.

During the past few years, Amex has shifted strategies to offer more credit products to customers. Its charge cards historically required customers to pay their full balance each month, but Amex now lets customers pay over time with interest. Its interest income grew quickly from 2021 through 2024, but slowed to just 11% growth in the first quarter. That's mostly due to the law of large numbers, as interest income now accounts for nearly a quarter of its revenue.

Amex may be a bit more insulated from an economic slowdown compared to other banks and payment processors due to its focus on high-income households and lesser focus on interest income. As such, it's less susceptible to loan defaults. Amex trades for a significant premium relative to its most comparable competitor, Capital One Financial, but it arguably deserves a premium due to the strength of its customer base, its scale, and its ability to boost revenue through fee increases and more interest-bearing services.

3. Coca-Cola (10%)

Coca-Cola (NYSE: KO) is another stock Buffett bought more than 30 years ago and has no plans to sell anytime soon. His original $1.3 billion investment in the company (yes, the same amount he invested in Amex) is now worth about $29 billion. Not to mention, Coke's paid out more and more each year in dividends. Berkshire shareholders will collect roughly $816 million in dividends from Coca-Cola this year.

The appeal of the company is two-fold.

First of all, it has one of the strongest global brands in history. The red Coca-Cola logo is known the world over transliterated into practically every language known to man. Its brand strength extends well beyond its flagship product, though, to include top-selling carbonated drinks, water, juice, and sports drinks. That gives it considerable pricing power, which it has used to help offset inflation in recent years.

The second factor is its huge scale, which has made it cost-effective to create localized supply chains for producing and packaging its products. That's come to the fore in recent months as global trade policies put pressure on other global companies. Coca-Cola has managed to avoid the impact of tariffs more than its competitors, enabling it to keep its costs down. During its first-quarter earnings call, management warned it's not immune to global trade dynamics, but it's better positioned than most businesses.

Both of those advantages helped Coke produce strong first-quarter results while reaffirming its forecast for the full year. Revenue grew 6% and earnings per share grew 1%. Those numbers might not seem impressive, but they look great compared to Coke's biggest rival PepsiCo, which saw revenue and earnings per share shrink in the first quarter.

Coke's relative strength hasn't gone unnoticed. The stock price has climbed 15% year to date as of this writing, and the shares trade at 24 times forward earnings. That's higher than its historic average, but not outrageously so. With its strong position in the current economic environment, it might be worth paying a premium for Coca-Cola stock. You'll also collect a nice 2.8% dividend yield at the current price.

Should you invest $1,000 in Berkshire Hathaway right now?

Before you buy stock in Berkshire Hathaway, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Berkshire Hathaway wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $651,049!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $828,224!*

Now, it’s worth noting Stock Advisor’s total average return is 979% — a market-crushing outperformance compared to 171% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 2, 2025

American Express is an advertising partner of Motley Fool Money. Adam Levy has positions in Apple, Mastercard, and Visa. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, Mastercard, and Visa. The Motley Fool recommends Capital One Financial. The Motley Fool has a disclosure policy.

The last couple weeks of springtime have seen the market itself spring to life. There are investing opportunities in both stocks that have fallen out of favor and some popular growth stocks.

Some of my favorite stocks right now are Sirius XM Holdings (NASDAQ: SIRI), Nintendo (OTC: NTDOY), and Roku (NASDAQ: ROKU). They are well positioned to keep rising from here, armed with some obvious and some not-so-obvious bullish catalysts. Let's take a look.

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1. Sirius XM Holdings

Don't let the weak stock chart facade dissuade you from taking a closer look at the country's satellite radio monopoly. Sirius XM stock was cut in half last year, and it still hasn't bounced back in 2025. There are some solid reasons for the media stock's meandering ways, but there are also a compelling valuation, chunky yield, and potential tailwinds to consider.

Let's start with the negatives. It's been more than a decade since Sirius XM posted double-digit top-line growth, and revenue is now declining slightly for the third year in a row. Auto sales are the funnel that leads to new subscriptions, and that market has been weak. Young drivers are also turning to streaming smartphone apps for in-car entertainment, bypassing Sirius XM's premium offering. If this looks pretty bleak, turn the corner. Sirius XM may be about to do exactly that a lot sooner than the market thinks.

It was easy to see why Sirius XM was struggling coming out of the pandemic. Folks were working from home, so it was easy to justify sidestepping in-car subscriptions for a product that eases daily commutes. This is starting to change, with more and more companies calling employees back to the office. Gas prices are low, down 12% across the country over the past year and 22% lower than they were three years ago. This should be an incentive to get folks driving more, increasing the value proposition of coast-to-coast coverage of Sirius XM's premium content. Meanwhile, if financing rates start to ease up and the economic outlook improves, there's going to be a lot of pent-up demand for new vehicle sales with factory-installed Sirius XM satellite receivers.

The valuation is better than you might think for a company on the cusp of turning things around. You can buy Sirius XM stock for less than 8 times this year's projected earnings. If the recovery takes some time, it literally pays to be patient. The stock's 4.9% yield is a lot better than both the market average and what sideline sitters are generating in money market yields.

Don't take it from me, though. Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) has boosted its stake three times since the fall of last year. Warren Buffett's holding company now owns more than a third of Sirius XM. I'm happy to own a much smaller chunk of the company.

2. Nintendo

Let's play a different game with this one. Nintendo isn't out of favor like Sirius XM. Shares of the Japanese video game pioneer hit another all-time high this month. The market is buzzing about next week's rollout of the Switch 2, Nintendo's first new gaming system in more than eight years.

This is a pretty big deal. Revenue and earnings for Nintendo tend to triple if not quadruple in the three to four years after a major new console comes out. The business itself is already well ahead of where Nintendo was when the original Switch hit the market in March of 2017. Nintendo's multigenerational appeal continues to widen. Nintendo has successfully jump-started its presence as a theatrical property, and it now has a presence with a dedicated land in three of the world's largest theme parks. Nintendo is richly priced based on recent financials, but the future is what is fueling renewed interest here. With demand for Switch 2 outstripping supply, the next couple of years should treat investors to stellar growth.

3. Roku

There's no sugarcoating the ugly multiyear stock chart here. Roku shares are trading 85% lower than their peak in the summer of 2021. That doesn't mean that Roku isn't in a much better place now. The company behind North America's leading operating system for TV streaming has never entertained an audience this large with engagement levels perpetually rising.

The 16% revenue growth it posted in its latest results extends its streak of double-digit gains to eight quarters. Losses continue to narrow, and Roku is forecasting a return to profitability in the second half of this year. With time spent on the platform having risen 16% over the past year, it has a firm hold on its viewers, who spend hours a day channeling their TV consumption through Roku's landing page. Its guidance for the second quarter did come in a bit light, but it's still stretched its streak of double-digit revenue growth to nine quarters.

Should you invest $1,000 in Sirius XM right now?

Before you buy stock in Sirius XM, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Sirius XM wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $653,389!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $830,492!*

Now, it’s worth noting Stock Advisor’s total average return is 982% — a market-crushing outperformance compared to 171% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 19, 2025

Rick Munarriz has positions in Nintendo, Roku, and Sirius XM. The Motley Fool has positions in and recommends Berkshire Hathaway and Roku. The Motley Fool recommends Nintendo. The Motley Fool has a disclosure policy.

On April 2, which President Donald Trump coined as "Liberation Day", Trump announced high tariff rates against nearly all major trading partners of the U.S., including China, India, Japan, and Vietnam, among many others. The news caught the market by surprise and sent stocks spiraling. From highs made in late February, the broader benchmark S&P 500 (SNPINDEX: ^GSPC) fell close to 20%, essentially entering bear market territory.

However, later in April, Trump announced a 90-day pause on tariff rates, indicating that he was open to making trade deals, which sent the market into a furious rally. The S&P 500 is down about 4% this year (as of April 7).

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Many have wondered whether the greats -- like Warren Buffett and the investing team at Buffett's company, Berkshire Hathaway -- took advantage of the sell-off to buy the dip. While we still technically don't know, we just got a major clue.

Berkshire was a net seller of stocks in the first quarter

Berkshire recently reported its first-quarter earnings report. While we'll have to wait until May 15 to see what specific stocks Berkshire bought and sold in the first quarter of the year (which includes January, February, and March), we can see from Berkshire's cash-flow statement that the company was a net seller of stocks in the first quarter of the year.

The company sold over $4.6 billion of equities and purchased nearly $3.2 billion.

Berkshire also continued to hoard cash in the first quarter, growing cash, cash equivalents, and short-term U.S. Treasury bills to over $342 billion. Remember, the first quarter doesn't include April, when tariff-induced volatility in stocks began. However, the market had begun to struggle in March, and Buffett and his team of investing lieutenants at Berkshire didn't appear to have viewed it as an opportunity.

Funds or investors who own more than 10% of a company's outstanding shares must file new transactions within two business days through a 13G filing. They also may need to file a 13D within 10 calendar days of first crossing 5% ownership in a publicly traded company.

Berkshire operates a massive equities portfolio and holds over a 10% position in nine of its holdings. But the company hasn't filed a 13D or 13G since mid-February, as of this writing, indicating that Berkshire hasn't yet increased any of its major holdings since then.

It doesn't sound like Buffett has been buying the dip

At Berkshire's annual meeting earlier this month, Buffett was asked about the company's large cash position and why it has been hoarding cash. If Buffett has been buying in April, he certainly didn't sound like it, based on his response, suggesting that opportunities don't come around too often:

And every now and then, you'd find something. And occasionally, very occasionally, but it will happen again. I don't know when. It could be next week. It could be five years off, but it won't be 50 years off. We will have -- we will be bombarded with offerings that we'll be glad we have the cash for. And it'd be a lot more fun if it would happen tomorrow, but it's very unlikely to happen tomorrow. Very, very unlikely to happen tomorrow. But it's not unlikely to happen in five years, and then it gets -- the probabilities get higher as you go along.

Based on that sentiment, I don't think that Buffett and the team at Berkshire bought the dip in April. While the company had plenty of dry powder, Berkshire focuses on long-term investments and doesn't like to trade based on the news cycle, which seems to be driving the market right now.

Of course, I could be wrong, but there are still lots of concerns about a potential economic downturn. Nobody can predict how the tariff situation will ultimately play out.

A key to Buffett and Berkshire's impressive performance is their timely withdrawal from the market before major crises. This may be one of those times where they see elevated risk in the market, and are choosing to play it safe for the time being.

Should you invest $1,000 in Berkshire Hathaway right now?

Before you buy stock in Berkshire Hathaway, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Berkshire Hathaway wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $614,911!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $714,958!*

Now, it’s worth noting Stock Advisor’s total average return is 907% — a market-crushing outperformance compared to 163% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 5, 2025

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.

It finally happened. Warren Buffett, the longtime CEO of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), announced during the company's recent annual meeting that he would be stepping down as head of the conglomerate by year-end. Buffett is 94 years old, so his decision can't be too much of a surprise.

However, some investors are worried. Buffett's leadership is one of the key reasons Berkshire Hathaway has produced market-beating returns over the past few decades. The man earned the title of the greatest investor of all time for a reason. How will things evolve once he is no longer at the head of the company? Can it still produce excellent returns to loyal shareholders?

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

These fears are what likely led to the conglomerate's shares falling by 5% after Buffett broke the news. However, my view is that Berkshire Hathaway remains an excellent "forever" stock, even as Buffett is stepping down.

Different leader, same philosophy

The man set to become the next CEO of Berkshire Hathaway is Greg Abel, the current VP of the company's non-insurance operations. Buffett didn't simply pick a random name out of a hat to replace him during the annual meeting. He made this choice long ago, back in 2021. By then, Abel had been with Berkshire Hathaway for 21 years. Buffett had had time to impart his knowledge and observe Abel enough to make him the heir apparent to Berkshire Hathaway.

There are likely many factors that led to Abel being picked as Buffett's successor, but one of them is, without a doubt, the belief that Abel is capable of and will keep applying the fundamental philosophy and investing principles that have made the business so successful since the '60s. That's what Abel plans to do. During the company's annual meeting, when Buffett broke the news, Abel said the following:

It's really the investment philosophy and how Warren and the team have allocated capital for the past 60 years. Really, it will not change. And it's the approach we'll take as we go forward.

Abel's mention of Berkshire Hathaway's "team" is another crucial point. Buffett was not the only one responsible for the company's success. He had a longtime partner in Charlie Munger, who died in 2023. Similarly, more than one man now occupies a high position within the company and has gobbled up Buffett's wisdom and investing acumen.

Berkshire Hathaway's team will still feature other famous names, including Ajit Jain, the vice chairman of the company's insurance operations. There are several others. The team that will carry the torch after Buffett steps down as CEO will inherit something else besides Buffett's investing philosophy: an incredibly strong and diversified business.

The closest stock to an ETF you can buy

One of the reasons Berkshire Hathaway has crushed the market over the long term is its impressive mix of stocks. The list of the company's subsidiaries is long and includes businesses across many sectors and industries, from railroads and energy to insurance and manufacturing. True, some of the company's segments are far more important than others. Berkshire Hathaway's insurance business carries a lot more weight than most other individual units.

However, overall, the company's operations are incredibly diversified, much more than any other publicly traded corporation. Some of Berkshire Hathaway's subsidiaries might not perform well at any given point, but they won't all be affected the same by economic or marketwide challenges.

That's a significant strength, and that's before we factor in Berkshire's investment portfolio. Here, too, the company is somewhat diversified across consumer goods, consumer staples, financial services, energy, and more.

Beating the market is notoriously challenging, partly because major indexes are well diversified. That's why many investors opt to buy exchange-traded funds (ETFs) that track the performance of these indexes. Berkshire Hathaway is the next best thing, and it is even better because it was put together by the best investor of all time.

Buffett might be stepping down, but his style and philosophy will long outlive him within a company he has already set up for long-term success. Berkshire Hathaway was an excellent buy-and-forget stock before Buffett announced he would be stepping down. It remains so today.

Should you invest $1,000 in Berkshire Hathaway right now?

Before you buy stock in Berkshire Hathaway, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Berkshire Hathaway wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $617,181!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $719,371!*

Now, it’s worth noting Stock Advisor’s total average return is 909% — a market-crushing outperformance compared to 163% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 5, 2025

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.

Warren Buffett doesn't make many mistakes when it comes to investing, as evidenced by his supreme long-term track record in public markets. He and the team at Berkshire Hathaway (NYSE: BRK.B) seem to have made a mistake by investing in SiriusXM (NASDAQ: SIRI) -- at least, so far. The automotive satellite radio provider is down over 60% in the last five years, while the broad market indices have soared.

Today, the stock trades at a price-to-earnings (P/E) ratio of 8 and a dividend yield of 5%. Does Berkshire Hathaway see something in SiriusXM that the rest of the market is missing? Let's dive in further and investigate this fallen internet stock and see if it is a buy for your portfolio today.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Declining revenue, competitive threats

SiriusXM made its money selling satellite radio subscriptions in conjunction with automotive purchases. Today, this business is facing multiple headwinds with the rise of Spotify, Apple Music, and YouTube taking share from satellite radio for talk and music. Its subscribers stood at 32.86 million last quarter, which is below its user count at the end of 2018.

Lower subscriber figures have led to declining revenue, with sales now off 4.4% from all-time highs last quarter. This is coming at a time when the streaming music services such as Spotify are growing like gangbusters, which are putting a world of hurt on SiriusXM's business. With the rise of Google and Apple Car Play, users can stream the same applications in vehicles that they use on their phones, which has disrupted SiriusXM's competitive edge.

It has tried to fight back with a stand-alone SiriusXM streaming application, acquiring rights to podcasts, and even acquiring Pandora Radio back in the day. It has not lived up to expectations, with this other segment seeing a 2% decline in revenue year over year last quarter. Management is guiding for $1.15 billion in free cash flow this year, but that is still well below all-time highs set a few years ago. If revenue keeps sliding, free cash flow will eventually disappear.

Perhaps it wasn't a Buffett investment?

Just because a stock is owned by Berkshire Hathaway does not mean it was a Warren Buffett investment. The company has two investors -- Todd Combs and Ted Weschler -- who manage billions of dollars of investments. One of these investors may be the purchaser of SiriusXM stock instead of Buffett, who at this point only dabbles in investments that can move the needle for the trillion-dollar market-cap stock.

At a market cap of just $7 billion, SiriusXM is not going to be a meaningful contributor to Berkshire Hathaway's stock portfolio even if it goes up by 10 times. The company owns $2.8 billion worth of SiriusXM stock. If that stock is worth $28 billion someday, that is barely 2% of Berkshire's market value. A 10 times move upwards is highly unlikely too.

SIRI Dividend Yield data by YCharts.

The truth behind SiriusXM stock

With a dividend yield of 5%, you might think SiriusXM stock is a buy just because Berkshire Hathaway owns it. In this case, following Berkshire Hathaway blindly has led an investor to lose money.

The problem with SiriusXM is not just its declining subscribers and declining revenue. It is the huge debt load carried on its balance sheet. The company has over $10 billion in long-term debt vs. its $1.1 billion in projected 2025 free cash flow. Free cash flow will decline if revenue keeps sliding. The debt is mostly due before 2030, meaning that SiriusXM is going to have to scramble to pay back these loans or refinance at higher interest rates. Either way, this is not good for shareholders.

SiriusXM is a stock with declining revenue and heavy indebtedness in a declining industry. Even with a high dividend yield of 5%, it is best to stay away from this stock. It's unclear what Berkshire Hathaway sees in this business.

Should you invest $1,000 in Sirius XM right now?

Before you buy stock in Sirius XM, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Sirius XM wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $617,181!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $719,371!*

Now, it’s worth noting Stock Advisor’s total average return is 909% — a market-crushing outperformance compared to 163% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 5, 2025

Brett Schafer has positions in Spotify Technology. The Motley Fool has positions in and recommends Berkshire Hathaway and Spotify Technology. The Motley Fool has a disclosure policy.

In this podcast, Motley Fool analyst Jim Gillies and host Dylan Lewis discuss:

• Warren Buffett's plan to step down as CEO of Berkshire Hathaway.
• The parallels between Berkshire's succession planning and Apple's transition from Steve Jobs to Tim Cook.
• The available cash, opportunities, and challenges ahead for Greg Abel and team.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

A full transcript is below.

Should you invest $1,000 in Berkshire Hathaway right now?

Before you buy stock in Berkshire Hathaway, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Berkshire Hathaway wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $623,103!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $717,471!*

Now, it’s worth noting Stock Advisor’s total average return is 909% — a market-crushing outperformance compared to 162% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 5, 2025

This video was recorded on Mai 05, 2025

Dylan Lewis: After 60 years, Buffett passes the torch. Motley Fool Money starts now. I'm Dylan Lewis. I'm joining for the airwaves by Motley Fool candidate analyst Jim Gillies. Jim, thanks for joining me on this momentous Monday.

Jim Gillies: Indeed. Thanks, Dylan.

Dylan Lewis: We talk about the news very often. We don't always get something this good when something happens over the weekend. To quote the great Warren Buffett himself, the Time Has Arrived. After 60 years as CEO of Berkshire Hathaway, Warren Buffett announced he'll be stepping down at the end of 2025 for a well deserved semi retirement. He announced this Jim, closing out the annual meeting in Omaha over the weekend, which was news to basically everybody except his kids.

Jim Gillies: Correct. Yes, I had I had a number of friends on the floor, and one of them texted me with literally as he was speaking going, holy insert golf word here. Buffett just announced his retirement and I'm like, OK, I have to take a moment to process this.

Dylan Lewis: Yeah, in typical Buffett fashion, it wasn't I'm leaving the CEO seat. It was him handing over the reins, but it was in an overview of board meetings and votes, and recommendations. I think if it weren't for the standing ovation, if you had tuned out for a second, you actually might have missed it because it was right at the end of the meeting and discussion.

Jim Gillies: Yeah. Look, I'm a Berkshire shareholder for almost three decades. The entire way, Dylan, I've been told, aren't you worried? He's so old. He's going to die soon. Thankfully, a key lesson from Buffett reiterated many times over the years, including in this most recent annual meeting is like, you know what? Take your time, think through, things things are not that imperative in the moment. I'm very glad I've ignored all of the people saying, Oh, boy, he's really old. I similarly think about it a little bit today. It's like, Buffett has been prepping people for this for quite honestly nearly two decades. I remember after his first wife passed away, Susie, it was always the intent of the Buffett to give away the vast wealth that he's created. Susie was supposed to be the one because she was expected to outlive Warren. She was going to be the one handling the dispensation of that money. Susie's been gone for almost two decades now, Dylan.

We've seen him, I remember back might be 15 or so years ago now where they were first started talking about having the names of multiple people who could take over for him, step in whenever. The names in the envelope that could step in for him have changed. But a number of years ago, Charlie, who, of course, left us just over a year ago, Charlie let slip at one meeting that the only real name in the envelope that could take over for Buffett was Greg Abel, longtime CEO of Berkshire Hathaway Energy, MidAmerican Energy beforehand, and that he just confirmed what everybody largely knew. I don't think much is going to change. First off, in a completely unsurprising development, the board did, in fact, vote unanimously along with Warren's suggestion hands up, who thought that wouldn't happen.

Dylan Lewis: Yeah, zero surprise here.

Jim Gillies: Exactly. Well, also two board members are Warren's kids who, as you said, knew about this. They have, in fact, voted unanimously to pass the CEO's title to Greg Abel. This is the start of 2026. You've got another almost eight months with Uncle Warren at the helm, at which point he will remain as non-executive chairman. He did allude to the idea that should markets behave in a certain way, and he didn't say it, but I will plunge precipitously, they would be interested in deploying some of the massive cash hoard they've got now, which I think is playing with $350 billion. That he would be useful, perhaps reputation wise to help deploy some of that capital should circumstances require it. Again, he was too polite to say, if the markets blow up and people freak out. But that's what we're talking about here. Go back to 2008.

Dylan Lewis: If you find my advice helpful during any time, just let me know, essentially, the.

Jim Gillies: Yeah, exactly. But I don't think a lot's going to change, and part of that is because they've been gradually transitioning the day to day operating business into the hands of Greg Abel. They've long transitioned the decision making at GEICO or I say GEICO, just in the insurance arms, all of the insurance arms into the hands of Ajit Jain. They have long been adding to the responsibilities of Ted and Todd, the investing lieutenants. Buffett has long espoused that a ham sandwich should be able to run this business. In fact, I saw someone was quipping. Another Fool was quipping with us this morning. I hope Greg had a T shirt at that board meeting that said ham sandwich on it. I see the stock fell as much as 6 or 7% today. I wish it fell more. I hope it falls more in the next week or so, because obviously, I'm talking about it now, so I'm locked out. I would be a happy buyer of shares today without a thing and without a concern, frankly.

Dylan Lewis: Yeah, I was going to say this is the first time we've ever seen the market have to weigh what they think of a Berkshire without Buffett, maybe a 4% or 5% discount on shares today. I don't think anyone could find that unexpected. It's a surprise, no matter when it happens. It's a surprise no matter how well they lay out the succession planning. We've known Greg Abel since 2021 formally, would be taking over this seat. I think you're right. I think they've done such a nice job telegraphing what's coming and also telegraphing. There are core Berkshire principles to the way that we approach things, and that probably isn't going to change very much. I remember looking back on some of the content from the morning meetings and the Q&As, and stuff like that over the weekend. Someone had the foresight not knowing what was coming to ask, hi, Greg, what is something you've learned from Warren Buffett over the years? Incredibly pressing question, it turns out.

He talked about how when they were first meeting talking through MidAmerican Energy Holdings and that acquisition, the first thing that Buffett did was zoom in on the balance sheet. The first thing he did was zoom in on the derivative holdings for the company and start asking all these questions about risk exposure, what was actually there. Abel and Buffett both talked quite a bit at the annual meeting about the importance of being balance sheet oriented, looking at the fundamentals of these businesses. If you're a Berkshire shareholder, none of that stuff is going to change. That is going to continue to be the guide for how this management team is making decisions.

Jim Gillies: Yes. I don't think it was a surprise to anyone who's been a long term Buffett slash Berkshire follower. If you were not aware that Uncle Warren likes his balance sheets. If you ask Greg, what's one thing you learned? I thought you were going to say how to keep a secret because it did that a little bit.

Dylan Lewis: I'm guessing Greg maybe had a little heart palpitation there on stage, learning alongside all the Berkshire shareholders that this was happening.

Jim Gillies: What a vote of confidence, though to have that even though he knows the job is going to be his? Again, look, Uncle Warren is 94. He'll be 95 at the end of the summer. If you don't expect someone approaching that anniversary of their existence to be maybe wanting to slow down a little bit, plan for retiring. It had to have been the subject. Well, as I said, I have heard variants of the, are you sure you want to be here for as long as I've held shares, and my own personal shares, at least my earliest ones, I can legally rent a car in the US.

Dylan Lewis: Yes, they've matured.

Jim Gillies: Exactly.

Dylan Lewis: Way to put it.

Jim Gillies: They should hit the gym more. They're starting to have that middle age precursor happening there. Continue anyway.

Dylan Lewis: As you noted, this is a business now sitting on an incredible amount of cash, 347 billion, I think, as of most recent report and the updates over the weekend. I have to imagine that that was also some of the intentionality with this planning was Buffett unwinding some of the large positions that existed with Bank of America with Apple over the years and really putting Abel and the management team in a position to make decisions that they were excited about that they were interested in that followed Berkshire playbook and probably to be opportunistic as there's possibly some clouds out there on the horizon.

Jim Gillies: Yeah, he downplayed some of the people saying, Oh, you're just trying to set up things for Greg Abel. It's like, no, I'm not so charitable to make life easy for him. If an opportunity was here for me, I'd take it paraphrased. Apple is unquestionably the best a stock investment that Buffett has made. You could argue others have done better percentage wise or over a longer term. But in terms of the sheer amount of money, Buffett himself said, Tim Cook, Apple's CEO. Tim Cook has made more money for Berkshire shareholders than I have.

Dylan Lewis: Point taken.

Jim Gillies: Well, point taken. I will push back a little bit on Buffett and say, yeah, but you were the one that went into it. Again, ignoring what other people were saying, which 2016 ish was that it's the biggest company in the world. How much growth is there left turned out to do OK. I think it's going to be prescient for Berkshire because, of course, Apple itself went through its own, shall we say, high profile succession plan back in 2010-2011, because founder Steve Jobs, of course, famously, unfortunately, and I say this with all respect, drew the short straw in life. Had a health issue that tremendously shortened his life, and that was tragic. But before he went, of course, and Tim Cook had stepped in for a lot of the day to day stuff with Apple before that. But officially, I think a few weeks before, it's now it's back in 2011. It's a few weeks before Steve's ultimate departure. Tim Cook was made the official CEO. On that day, the stock didn't have a great day. I've said for a number of years now on various Foolish forms from a value creation perspective. Tim Cook has been a far better CEO for Apple than Steve Jobs was. Now, Tim Cook doesn't get this opportunity without Steve Jobs and without the vision and the idea.

I always say, Tim Cook is an execution guy. Steve Jobs is an idea guy or was an idea guy. The execution guy doesn't get to work as magic without the idea guy to start, and so you need both. But the sheer value that's been created at Apple in the Tim Cook era greatly outstrips what was created during the Steve Jobs era. But you got to give Job some credit for what he planted the seeds so that Tim Cook could have the harvest. I think that's what's probably going to unfold with Berkshire Buffett, Greg able is that Buffett has put all seeds in play and has put the culture in play, and has been, as we said before, slowly farming out bits and pieces of the business to the key players at Berkshire. He himself has said, literally at this meeting that he thinks the Greg Abel era going forward will probably make more money for Berkshire shareholders than he would.

Dylan Lewis: Yeah, I think he said, I will remain a shareholder, and that is a financial decision.

Jim Gillies: Exactly.

Dylan Lewis: I trust the management team here. I'm glad you brought up the Apple example because Buffett gave a nod to that, too. He hit a quote, "Nobody but Steve could have created Apple. Nobody but Tim could have developed it like he has." I think you could swap out the names there, and he's essentially talking about his own business.

Jim Gillies: He is. Now, will Greg Abel overseeing Ted and Todd? Will they be able to create some of the magic that we've seen in stock picking? I think actually, that'll be a tough sell. But I also think it's a tough sell under Buffett because of the size of the company. Again, Apple has been the last real big home run. There's been a bunch of little things that haven't worked out, and that's fine, or IBM didn't work out, or the airlines didn't work out. Now, I'm of the opinion that Buffett got out of the airlines during COVID. Because when the facts change, I changed my mind. What do you do, sir? The world changed. A worldwide pandemic that shuts down air traffic for a not insignificant period of time makes those airlines worth it changes the calculus about how you calculate the fair value of those airlines. He knew they were going to need government assistance, and he also knew that the optics of having Warren Buffett one of the richest people on Earth through Berkshire Hathaway, it wasn't Warren Buffett owning them, but it was Berkshire.

The fact that Berkshire Hathaway being the largest shareholder of all of these airlines that now all of a sudden need a bailout, the optics of that are going to be pretty bad. He also knew he didn't want to be the guy bailing out the airlines. I'm going to sell my shares. That takes him off the board and takes Berkshire off the board. That way, they can qualify reasonably well for government funding and whatever you think about airlines and their perpetual need to go hand in hand with the government at every crisis. I leave that as an exercise for the listener. I think it will be an interesting play from here. I don't think, and I say this again. I know I've said I'm trying to remain respectful and giving Warren Buffett and Berkshire Hathaway have been very good to me personally. As I've mentioned, it is my largest shareholding. It is my longest held shareholding. But let us be honest. The stock picking over the past decade or so has not been spectacular aside from Apple. I would argue that is not because Warren Buffett has faded in abilities or anything. That is because this is a $1.15 trillion company with a bazillion different irons in the fires, and there's not a lot. They mentioned there was a $10 billion acquisition, as well that they passed on. My response to that, all I could think of when I heard about that over the weekend was, who cares $10 billion? A $10 billion acquisition for a company with 348 or 350 billion in dry powder. It's 3% of your cash.

Dylan Lewis: It's not material.

Jim Gillies: It's irrelevant. I don't want to hear about $10 billion acquisitions prospectively. I want to hear about minimum $100 billion prospective acquisitions. Bigger is better. How many of those companies are out there that will be available at a price that Berkshire and Buffett, and Greg Abel, and Ted and Todd would think compelling? I submit to you there ain't many, which is one reason why I think Buffett is, Oh, you know, I'll go play. He's going to go day trade.

Dylan Lewis: It's a good time for him to step away. The house is relatively tidy. He's been able to put things in pretty good shape.

What is amazing to me, taking a step back on Berkshire is sitting on record levels of cash, and we know what cash is earning right now. It's year to date up more than 10%. The market is in the opposite direction, down about 4% year to date. Investors haven't seemed to mind giving them a little bit of time to put that money to work, and they've been rewarded for their patients so far. I don't think that will change. I think anyone who's expecting anything really large is going to be waiting quite a while. I think we're going to see a capital allocation and deployment strategy that is very much like what we've seen in the past, and that might mean we're looking at three figure billion dollar of cash on the balance sheet for a long period of time.

Jim Gillies: Yeah, I think you can probably assume because they've said this. Expect that cash balance to never again drop below 50 billion. Now, when you have 350 billion.

Dylan Lewis: There's room to go down.

Jim Gillies: Oh, we can just hold that, and it's fine. I'm genuinely curious to see, and I don't think you're going to see it anytime soon. I think Buffett probably needs to ultimately exit the board fully before you'll ever see anything here. But I'm curious to see because it took about a minute and a half after the announcement before various denizens of Twitter started saying, Oh, break up Berkshire Hathaway now. It needs to be broken up, or when are they gonna pay a dividend? Calm down, folks. I think really truly, nothing is going to change. Nothing is going to change as long as Buffett is consuming oxygen. I think nothing changes. When he ultimately leaves the scene, I think nothing's going to change really for a little while longer. I think they will continue in reinvesting in their existing businesses. It wouldn't shock me to see them deploying incremental capital in some of their already existent areas. More energy. They famously talked over the past, I'll say 15-20 years about how they like businesses where they deploy significant capital at good expected returns, but that would be the railroad, and that would be a few of their other businesses where again, have the utilities. I would be shocked outside of a market dislocating event. I would be shocked to see them make any meaningful draw down of that cash hoard. I don't think they're going out and buying Disney tomorrow. I don't think they're going out, or to go out take out Hershey, or try to acquire MARs privately. They might but these are the types of businesses that would be fun to see them make a run at Coca Cola. I will say that would tickle me a little bit.

Dylan Lewis: It would fit the profile, and it would certainly fit Buffett's tastes. Yeah, I think you're right. The market may give them that dislocating moment. We've talked at length on the show about how there is a bit of a precarious situation going on.

Jim Gillies: I don't know what you're talking about.

Dylan Lewis: Buffett has provided some commentary on that, and I can't think of a better position to be in to have $350 billion in cash if you expect there may be a lot of headwinds away and there may be some discounts available to the business. You mentioned railroads. You talked about energy a little bit. Any other sectors you think might fit the profile for a Berkshire acquisition if we start seeing some things on sale.

Jim Gillies: Coca Cola would be funny, but it's also possible. I don't know how far they'd get. No, I think you want to look in a space where they already have an interest. It will not be technology motivated. It's always going to be, well, where we like to invest in places where we think we know. There's the famous story about what was the best selling candy bar in the 80s? Well, it was Snickers.

Dylan Lewis: Snickers.

Jim Gillies: What was it in the 90s? Well it was Snickers. I don't know who's going to have the dominant operating system in 20 years. You probably make a good guess.

Dylan Lewis: But people are going to still be eating Snickers.

Jim Gillies: But you're probably going to be buying Snickers, and the pricing power of a Snickers or the pricing power of a can of Coke is probably going to or a bottle of ketchup he's famously got the Kraft Heinz Association is probably going to be there. I would like to see them. It's going to be a low technology possibility. The obvious things are more insurance, more energy consumer products with a significant brand mode. A Coca Cola, I joke a little bit, even at Disney, but even Disney's there are problems if Disney were to ever be something like that. I think it's going to be interesting to see where it goes. I'm signing up for the ride. I've been signed up for the ride for a while. At the very least, I'd like to not vacate my shares while I'm still drawing a regular paycheck because I don't particularly want to hand the government a large check. As you say, it's a great place to be. It has been a great place to be in the cornerstone of my philosophy.

My investing philosophy has to have the ballast holdings in my portfolio, of which Berkshire is absolutely one. It's the largest one, as I've said. Those ballast holdings that, for me, Brookfield is another one. Some people really like Fairfax Financial. Have your ballast holdings so you can go out and do some more riskier plays. I'm not talking day trading or penny stocks, or stuff like that. But still, things that may or may not work out for you, but you've always got the ballast and just to keep you calm. Then in days when you see those market dislocations, I would really encourage people to go back and look at what Buffett was doing during the global financial crisis, the 2008 crisis. He wasn't panicking. Stock got hit along with everything else. That's fine.

Buffett has said even this weekend. We don't care about that stuff. Berkshire's fallen, I don't know how many times by 50%. Doesn't bother us in the slightest. Focus on the business, all that wonderful stuff. But remember what he did back then. Goldman Sachs came hat in hand. The vampire squid came hat in hand. Buffett said, sure, I'll help you. Here's your 15% anchor. Harley Davidson came hat in hand. Sure, we'll help you. Here's your 15% anchor. Bank of America. I think gave penny warrants or dollar warrants as part of the investment. Don't call it a bailout, as part of the investment that Buffett made in Bank of America, and there's others. That's one thing I think I want people to remember about. Buffett's got this kindly Midwestern old dude cut of persona. When it comes to allocating capital, dude's killer. You want my money, it's gonna be 15%. My end is 15 precious, and that's how we're starting, and we'll take a little bit of equity comp, as well. I hope that Greg Abel and Ted and Todd can be similarly value extractive, shall we call it, during future market dislocations, which as Buffett again, said this weekend, are coming. We don't know when they are. They will come. Probably be a Tuesday. He seems to think that the business is in good hands with Greg running it. Again, if we have trusted Buffett's process on the building of Berkshire, I would suggest to you we should be similarly trusting of his transition planning for the business that he's booking.

Dylan Lewis: Jim, it sounds like even though he won't be calling the shots for your largest holding, his tenets, his investing style, remain the pillars of your portfolio and how you expect the Berkshire will continue to be rough.

Jim Gillies: Sounds about right to me, yes.

Dylan Lewis: Jim, thanks for talking through it to me.

Jim Gillies: Thank you, Dylan.

Dylan Lewis: As always, people on the program may have interests in the stocks they talk about and Motley Fool make formal recommendations for or against. So far it's I think based on what you hear. All personal finance content follow Motley fool editorial standards is not approved by advertisers. Advertisements are sponsored content, provided for informational purposes only. See our full advertising disclosure. Check out our show notes for the Motley Fool Money team. I'm Dylan Lewis. We'll be back tomorrow.

Bank of America is an advertising partner of Motley Fool Money. Dylan Lewis has no position in any of the stocks mentioned. Jim Gillies has positions in Apple, Berkshire Hathaway, and Brookfield Asset Management. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, Brookfield Asset Management, Fairfax Financial, Goldman Sachs Group, Hershey, International Business Machines, and Walt Disney. The Motley Fool recommends Kraft Heinz. The Motley Fool has a disclosure policy.

Berkshire Hathaway (NYSE: BRK.B) (NYSE: BRK.A) has been a tremendous investment since the stock went public back in 1980. During that span, the insurance-led conglomerate has had only one chief executive officer: Warren Buffett. Buffett would prove himself to be one of the greatest investors of all time during his tenure at Berkshire.

However, Buffett shocked shareholders when he announced at the company's annual shareholder meeting that he would step down from the CEO role at the end of the year. Taking his place will be Greg Abel, his long-appointed successor and current head of Berkshire's energy division. Buffett will, however, stay on as a member of Berkshire's board.

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Unlike Buffett, Abel is not a renowned investor. Instead, his strength lies in his operating expertise and being a shrewd dealmaker. He made a string of acquisitions to help turn a sleepy Iowa utility into a major power production and pipeline company that is now called Berkshire Hathaway Energy. Meanwhile, he has been running Berkshire's non-insurance businesses since 2018.

However, Abel will not be running Berkshire's huge investment portfolio. That job will fall to Todd Combs and Ted Weschler, whom Buffett brought on to help run that side of the business several years ago. Ajit Jain, meanwhile, will continue to run the day-to-day business of Berkshire's insurance operations.

A lot of cash and a new CEO

Buffett will leave his CEO role at Berkshire, leaving behind an unmatched legacy. He created a unique model for the insurance industry where he eschewed investing Berkshire's insurance float in safe, fixed-income investments, instead investing it in stocks. Float is the money that insurance companies collect in premiums and hold until a claim is paid out.

This decision, combined with Buffett's investment acumen, has created an enormous amount of shareholder value over the years. Buffett has a long-term investment focus, and he would buy stakes in companies he believed were undervalued that have the ability to keep compounding for decades. One of his most famous investments is Coca-Cola, which Berkshire began buying in 1988 and still holds today.

Buffett also leaves Abel and Berkshire Hathaway with a tremendous stockpile of cash. Buffett began selling stocks last year ahead of the market sell-off, while also ending the company's buyback program. Together with increased operating profits, Berkshire ended the first quarter with a whopping $347.7 billion in cash on its balance sheet.

Despite the recent market volatility, Buffett also didn't seem eager to run out to buy stocks ahead of stepping down as CEO. He told investors that Berkshire will eventually find places to invest its cash, but that "it's very unlikely to happen tomorrow." However, he noted that it would likely find someplace to invest in the next five years. He has shrugged off the recent market downturn, saying it hasn't been a dramatic bear market.

Unless a great investment comes along in the next eight months, it looks like Abel will have a large cash hoard when he steps in as CEO. How he allocates that money will be interesting, but it likely will be different than if Buffett were CEO. After all, Buffett is a stock picker, and Abel is an operator.

Instead of investing in stocks, I would expect Abel to be on the lookout to buy entire businesses. I wouldn't be surprised if he sold some Berkshire businesses, as well. The conglomerate has nearly 200 disparate businesses, ranging from railroads to ice cream parlors. Buffett collected a lot of undervalued businesses with little to no synergies, while at MidAmerican Energy, Abel went out and made synergistic acquisitions that positioned the company to be one of the largest utility companies in the U.S.

This strategy shift would not be a bad thing, but it would certainly be much different than how Berkshire was run in the past.

Is Berkshire stock a buy?

Buffett is also leaving Berkshire with a pretty high stock valuation. The stock currently has a price-to-book (P/B) ratio of 1.7, which is one of the highest levels during the past decade. Buffett even stopped buying back Berkshire stock mid-year last year due to its high valuation.

BRK.B Price to Book Value data by YCharts.

When Buffett is no longer CEO, there's also a good chance that the Buffett premium in the stock will start to wane. In the past, Buffett would only buy back stock when it traded at a P/B below 1.2 times, so if the stock were to return to about this level, it could have some meaningful downside from current levels.

With Buffett appearing unlikely to use his cash stockpile anytime soon and a potential shift in its overall investment strategy (more toward buying operating businesses than stocks), my prediction is that this won't be the same Berkshire Hathaway stock in the years to come.

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On May 3, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) reported its first-quarter 2025 results and hosted its annual shareholder meeting in Omaha.

One of the standouts from the earnings release was Berkshire's position in cash, cash equivalents, and short-term Treasury bills, which increased by 84% over the past year from $188.99 billion as of March 31, 2024, to a whopping $347.68 billion as of March 31, 2025.

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Yet even with all that cash, Berkshire elected not to repurchase its own stock. It marked the third consecutive quarter Berkshire didn't buy back its stock -- which is out of the ordinary considering Berkshire had been on a 24-quarter streak of buybacks prior to the recent dry spell.

Here's what the treasure trove of cash and lack of buybacks signal, and if Berkshire is still an excellent value stock to buy now.

Building up cash

Buffett has a track record for making occasional blockbuster moves and then doing very little for multiple years. The strategy involves deploying significant capital toward top ideas rather than acting on impulse.

Most of Berkshire's largest stock holdings were acquired fairly quickly and then held over time. Similarly, the success of controlled assets like Berkshire's insurance businesses is a testament to developing these businesses over the long term, not constant wheeling and dealing.

If there were ever a time for Berkshire to build up its cash position, it would be now.

The S&P 500 is coming off back-to-back years of over 20% gains in 2023 and 2024 -- which Berkshire benefited from through its holdings in public securities and the growth of its controlled assets.

Furthermore, interest rates are relatively high, which provides an added incentive to hold risk-free assets like Treasury bills.

Data by YCharts.

Given these factors, it makes sense why Berkshire would build up its cash position, but that still doesn't explain why it wouldn't repurchase stock.

Berkshire's valuation is more expensive

The price-to-book ratio, also known as book value, is a better financial metric for valuing Berkshire than price-to-earnings or price-to-free cash flow because Berkshire operates as a conglomerate where net income can swing wildly from year to year based on changes to operating earnings and the value of its businesses.

Buffett has long used buybacks as a way to return capital to shareholders. Berkshire famously doesn't pay a dividend because Buffett feels that buybacks are a better use of capital than the one-time benefits of dividends, and he's been absolutely correct, given the long-term appreciation of Berkshire's stock price.

In Berkshire's quarterly earnings reports, there's a note that "Berkshire's common stock repurchase program permits Berkshire to repurchase its shares any time that Warren Buffett, Berkshire's Chairman of the Board and Chief Executive Officer, believes that the repurchase price is below Berkshire's intrinsic value, conservatively determined." And that "repurchases will not be made if they would reduce the value of Berkshire's consolidated cash, cash equivalents and U.S. Treasury bill holdings below $30 billion."

Since Berkshire's cash equivalents and U.S. Treasury bill holdings are over 11 times the $30 billion threshold, the holdup must be due to Berkshire's intrinsic value being above what Buffett would like.

Historically, Buffett has given the green light for buybacks when Berkshire's book value falls below 1.1, which was later upped to 1.2 times book value. But the guidelines have been flexible in recent years because Berkshire was buying back stock before the recent pause at higher price-to-book levels.

Berkshire's book value has soared because its market cap has grown at a faster rate than the value of its assets. Or, put another way, the stock price has been going up not because of massive gains in public equities Berkshire holds, but because investors are putting a premium price on its controlled assets and cash position.

Data by YCharts.

Berkshire is viewed as a safe stock amid tariff turmoil and market uncertainty because of its operational excellence and industry-leading performance across key economic sectors. Many of Berkshire's controlled assets, like the insurance businesses, are U.S.-focused, insulating them from geopolitical and trade tensions.

It's also worth mentioning that, during the annual meeting, Buffett discussed the 1% excise tax imposed on stock buybacks by publicly traded companies as another reason why buybacks aren't as attractive right now.

Buying Berkshire for the right reasons

The simplest reason to own Berkshire Hathaway stock over the long term is a belief in its capital allocation strategy and risk management. Berkshire stock isn't as cheap as it used to be, but just because Berkshire isn't buying back its stock doesn't mean individual investors should run for the exits. Berkshire is simply doing what it feels is best to maximize operating earnings and protect savings that investors have entrusted it to manage.

All told, Berkshire isn't a screaming buy, but it's a perfectly fine stock to buy and hold for long-term investors looking for a company they can count on no matter what the economy is doing.

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See the 10 stocks »

*Stock Advisor returns as of May 5, 2025

Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.

There may never have been a smoother transition from an iconic CEO to a successor. Warren Buffett and Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) let markets know several years ago that Greg Abel would be Buffett's eventual replacement. Abel is currently vice chairman of Berkshire's non-insurance businesses.

Buffett officially said this weekend that he would step down and hand the reins to Abel at the end of the year. The announcement came as a surprise, even though investors had known to expect it. Berkshire shares tanked Monday on the news, dropping nearly 7% before paring those losses.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Investors might be wondering whether they should be buying or selling Berkshire Hathaway stock now.

Can Berkshire survive without Buffett?

Buffett was the key force in building Berkshire Hathaway into a trillion-dollar company. So it's natural for investors to wonder about holding the stock when Warren Buffett is no longer the decision-maker. Today's stock reaction is overdone, though. Buffett will be staying on as chairman of the board and isn't even passing the CEO torch to Greg Abel until the end of the year.

Some investors may have wanted to have their money handled by Buffett himself. His investing philosophy is unique, and his results have been spectacular. That includes this year as Berkshire stock has greatly outpaced the S&P 500 index thus far.

On Saturday, at the 2025 shareholders meeting, Buffett said that not only will Berkshire survive, he thinks it will thrive under Abel's leadership. Buffett said Abel would be even better than he at managing the company's vast array of operating businesses.

Buffett made his name by being opportunistic. He poured billions into quality names during the Great Recession of 2008-2009. Investors should do the same with Berkshire stock, though even today's drop doesn't make shares a bargain. They trade at a relatively high valuation compared to recent years. Starting a position now could make sense, but wait for a bigger drop to dive in.

Should you invest $1,000 in Berkshire Hathaway right now?

Before you buy stock in Berkshire Hathaway, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Berkshire Hathaway wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $623,685!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $701,781!*

Now, it’s worth noting Stock Advisor’s total average return is 906% — a market-crushing outperformance compared to 164% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 5, 2025

Howard Smith has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.

In this podcast, Motley Fool analyst Jason Moser and host Ricky Mulvey discuss:

• How trade disputes are impacting the Port of Los Angeles.
• What PayPal's advertising business means for its growth story.
• Earnings from Spotify.

Then, Motley Fool personal finance expert Robert Brokamp joins Ricky to discuss how to diversify your savings.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy.

A full transcript is below.

Should you invest $1,000 in PayPal right now?

Before you buy stock in PayPal, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and PayPal wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $623,685!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $701,781!*

Now, it’s worth noting Stock Advisor’s total average return is 906% — a market-crushing outperformance compared to 164% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 5, 2025

This video was recorded on April 29, 2025

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Ricky Mulvey: The ships are slowing down. You're listening to Motley Fool Money. 'm Ricky Mulvey joined today by Jason Moser, the man who can do it all by himself. Jason, thanks for being here, man.

Jason Moser: Thank you for having me, Ricky. How's everything going?

Ricky Mulvey: It's going pretty well. I'm going to Casa Bonita tonight, which I feel like is a real introduction to Denver, and I will tell you about what that is maybe after the show, because we got a lot of news to break down.

Jason Moser: Yes, we do.

Ricky Mulvey: Let's get to this story. We have a lot of earnings going on, but I think this macro story is worthy of investors attention. Gene Seroka is the executive director of the Port of Los Angeles, and anytime you start getting port directors going on cable news, it's usually not a great sign for the economy, JMo. He went on CNBC's Squawk Box, and he said that he expects cargo volume to be down by more than a third next week, compared to last year, and that a number of major American retailers are stopping all shipments from China based on the tariffs. To lay out the law, who's getting hurt by this?

Jason Moser: Maybe the better question is, who isn't getting hurt by this? Because it does seem like something that is going to hurt an awful lot of folks covering the spectrum there. I think, generally speaking, small businesses stand out as ones getting a bit more hurt by this, at least in the near term. They tend to not have the same financial resources and are a little bit more dependent on imports and whatnot. I think large companies like Walmart, your Costcos of the world, they're able to shoulder the burden more just because of their scale. Now, with that said, I will say Walmart is particularly levered to China, for example. It's estimated that 60-70% of Walmart's globally sourced products actually come from China. Even more noteworthy, I think there is market research that suggests that figure could be closer to 70-80% for merchandise sold in the US so they're not immune, but they have the ability to shoulder that burden. They can handle it and bye their time as all of this tariff stuff plays out. I think ultimately that really points to the biggest question mark in regard to all of this is just when is this going to ultimately be resolved? And that is still just very unclear, but there's just no question, small businesses are going to feel the brunt of this very quickly.

Ricky Mulvey: Well, I think there will at least be an inflection point when these decreased shiploads lead to empty shelves in physical stores and on online stores like Amazon. I've noticed that these looming tariffs have absolutely impacted my shopping habits. Are you doing any pre tariff shopping in the Moser household right now?

Jason Moser: I have not yet, but it is still early. Now, when I start seeing Chewy telling me that our dog and cat food is out of stock and that shipment's not coming, then I know I've got serious problems because I have three dogs and a cat that won't stand for that, and I can't explain it to him either. But as of now, listen, I've got a garage full of toilet paper and paper towels so I think we at least have the necessities for now.

Ricky Mulvey: You've got a big yard, and you just might need to learn how to hunt in order to provide for your dogs. I've noticed it over here, I just bought a set of AirPods because I'm like, Oh, these are made in China and better get them while I can, first of all, get them and while they're on sale. I've been stocking up on clothes just because I don't know what's going to happen to the shelves. I don't know if my size is going to be impacted, but yeah, it's absolutely impacted my shopping habits, Apollo's chief economist Torsten Slok released a presentation earlier this month, and he laid out a timeline for tariffs, and there's a slide with the spicy title for a PowerPoint slide, the voluntary trade reset recession. Points out early mid May, that's when you start seeing those containerships come to a stop. Then in mid to late May, that's when trucking demand also comes to a halt a fewer trucks are taking things off containerships. Then right in that late May, early June window, that's when you're going to see empty shelves and companies responding to lower sales. What do you think about that timeline?

Jason Moser: I think it's certainly a potential outcome in theory. Now, if that happens, I think there will be massive political consequences. We have to look at this and say well, This is self inflicted. We started this, and it's a matter of trying to figure out, ultimately what the goal is here, and I think that is still unclear, and we're operating just on this day to day headline economy, so to speak. My hope is that this is a worst case scenario and that cooler heads prevail sooner rather than later. But listen, we're just getting ready to start May here, very soon so that's not far off and if that happens, clearly, the consumer will have their say.

Ricky Mulvey: Let's take a look at PayPal reported this morning, and JMo is an investor in this company. I'm pretty happy to own a company that's not making big moves on earnings right now. I'll take some stability that seems to be what PayPal is offering, revenue up 2% on a currency neutral basis. Transaction margin dollars, which is just direct transaction revenue minus transaction expenses. Think things like payment processing, and PayPal likes that is a core measure of its profitability. That was up 7% to about $3.7 billion. Free cash flow, and adjusted free cash flow, both down from last year by about 45% in a quarter respectively. There's some cash flow questions, some operating profitability targets happening. What are your big takeaways from the quarter?

Jason Moser: Yeah, I think it was an OK quarter. It was right in that meaty part of the curve, as George Costanza might say. Not showing off, not falling behind. It was their fifth consecutive quarter of profitable growth, which I think is really encouraging for Alex Chriss. As you mentioned, revenue growth was really non existent, but I wouldn't really look into that as much. I think what we're seeing with PayPal, they're doing a very good job of bringing things down to the bottom line. We saw GAAP earnings per share, up 56%, non GAP earnings per share, up 23%, and really just flew past the guidance that they offered from a quarter ago. I think when you look at the metrics that really matter for the business, things like total payment volume that was up 3%. $417 billion going through those networks there. This is up 4% currency neutral, payment transactions and payment transactions per active account saw a little bit of a decrease, but that's in regard to the payment service provider part of PayPal so, ultimately, those numbers actually excluding that payment service provider part of the business were up as well, and active accounts grew 2% to 436 million.

Remember, they went through just a period not too long ago of trying to call a lot of those inactive accounts that really aren't using the service, so to speak. But returned 1.5 billion dollar to shareholders with share repurchases, which I think was very encouraging. In regard to cash flow, I think the one thing with cash flow with PayPal, it's going to ebb and flow a little bit, particularly because of the buy now pay later side of the business, that fell a little bit, just because of some timing stuff between originating some European buy now pay later receivables and then the ultimate sale of those receivables so I wouldn't read too much into that. This is still a business that generates a ton of cash.

The one thing that stood out to me, though in the quarter that I just can't help but wonder what the future holds for this, because PayPal is building out this little ads part of the business right now, PayPal ads, and they're making some progress. I don't know is this a sneaky ad play? It could be, they're starting to introduce programmatic advertising, and they're starting to launch offsite ads, which ultimately those are ads that are generated from all of this data that PayPal and Venmo and those properties get. that's the beauty of this company. They generate a ton of data because of the consumers that use these services so it reminds me a little bit of Amazon back in the day. If you remember with Amazon, several years back, we knew they were getting into advertising, but didn't really know if it was going to be anything material so it was starting from nothing. But you fast forward to today, Amazon is generating they're on a $70 billion run rate for their advertising business alone. Now, I'm not saying that PayPal could get to that scale. But I do think PayPal could get to meaningful scale relative to its business, and that is very high margin revenue. I think that's going to be something fun to follow with this company as time goes on, particularly as they're launching this offsite advertising business.

Ricky Mulvey: I think one of my big questions then for PayPal's future is the buy now pay later initiative. You see here, Alex Chriss, touting the growth in that in that people are when they use buy now pay later, they're making more transactions. But if we're skidding into a self induced recession, there may be consequences for that, and on a personal level, I'm not super thrilled about buy now pay later. I understand it's part of the business. But speaking strictly as an investor is a growth lever. If you're looking at the growth in that and you're also seeing credit card delinquencies going up, maybe that's not a great thing for that part of PayPal's business.

Jason Moser: I think that's a very valid point. Buy now pay later is just credit card ultimately in another form and you have to count on the fact that some of those loans, so to speak, are not going to pan out, and they're going to write off delinquencies and non payments there. We are seeing consumers relying more and more on buy now pay later for. Buy now pay later, it's a clever product for things that maybe aren't necessities, but when you start seeing data that shows consumers are using buy now pay later for things like their groceries, that's where you start wondering what is the real condition or what is the real state of the consumer? And when you see consumers resorting to BNPL for necessities like groceries, that starts to raise at least some yellow flags in the near term.

Ricky Mulvey: What do you think about CEO Alex Chriss reaffirming the full year guidance? We talked about the macro pressures that will have an impact on this company. A lot of PayPal transactions are consumer spending. If you're in the office of the CEO, what are you telling him? Are you telling him to pool lower guidance? What's going on with that?

Jason Moser: I wouldn't tell him to pull guidance necessarily. I think that what we've seen with Chriss over the couple of years that he's been with the company at this point, he seems to at least like to underpromise and overdeliver I like that. Now, some people will call that sandbagging. I don't care, whatever you want to call it, it's fine on me. But he sets the bar fairly reasonably so he's not setting these super high aspirations, and we know how that works. You set the bar high, eventually, you miss it, and the market really punishes you. But if you set the bar just not low, but just right there in that mid range, that goldilocks range you can hit those targets, you can continue to grow at modest rates, and you're not disappointing the market in the near term. You're not really thrilling everybody in the near term either, but at least you're able to hit those targets and keep on moving the business in the direction that you intend. I don't mind them maintaining that guidance because it does seem like they are offering relatively modest expectations. But as we know, and we're seeing as the headlines change day to day, things can materialize very quickly so it'll be something to keep an eye on for sure.

Ricky Mulvey: Let's go to Spotify real quick. Monthly active users growing 10% for the company. Premium subs grew 12%, but the analysts did not like the user growth projections. That's why the stock is getting punished a little bit. CEO Daniel Ek quickly on the conference call saying we could be impacted by tariffs, but people still want to be entertained. They want to learn stuff they want to listen to music. Before we get into the meat of this conversation, JMo, we have a content partnership with Spotify. The Motley Fool actively recommends the stock, I own the stock. How's that for bias? I also want their algorithm to promote this podcast, as well. I'm speaking from a pretty biased perspective but still, in my view, a pretty strong company when you're looking into the actual business results, anything there stand out to you from Spotify's quarter.

Jason Moser: The stock has been on a heck of a run here recently so a little pullback is understandable. There was a bit of a miss on operating income there, and that was due to what they were calling social charge, what they call social charges, which are ultimately payroll taxes associated with employees salaries and benefits in other countries. But to me, this is still just such a strong business. You see the growth in the users, whether it's premium or ad supported. It's amazing to see what this business has become, and it's evolving so far beyond being like a music streaming app. I think that when you consider that you consider the fact that Spotify has such strong market share in the entertainment industry at large, to me I understand there are some macro concerns there in the near term, but I think when you look at it, at the end of the day, Spotify and things like Netflix, those are the subscriptions that consumers will probably cut last. The value-focused consumer is looking for value and understanding what are they getting for their dollar. That monthly charge for Spotify or for something like Netflix, given how much we all use those, they, I think, give this company a resiliency that probably more don't have.

Ricky Mulvey: We'll leave it there. Jason Moser, thanks for being here. Appreciate your time and your insight.

Jason Moser: Thank you.

Ricky Mulvey: Hey, it's Ricky, and I want to shout out another podcast called Radical Candor. Based on the New York Times best selling book, Radical Candor talks about how to be a great boss without losing your humanity. Kim Scott, Amy Sandler and Jason Rozov deliver actionable insights each week to help you improve your career and relationships. They have other business experts, including Guy Kawasaki and Steven Covery to stop in and share how they use Radical Candor concepts and their work. Their guidance will help you move beyond ineffective flattery and brutal criticism toward guidance that drives real growth and development. Listen every Wednesday for new episodes wherever you get your podcasts and see how you can apply Radical Candor in your life.

Are you feeling a little concentrated? Up next, Robert Brokamp joins me to discuss some ways to diversify your portfolio. This year has been a reminder that stocks can be volatile. In 2023 and 2024, investors were treated to 20% plus returns in the S&P 500. This year, both the NASDAQ and the Russell 2000 were in bear market territory, and the S&P 500 got pretty close. That's if we define a bear market is a drop of 20% or more from all time highs. A drop that in and of itself is the cost of doing business in the stock market, even if the reason this time is, well, you can decide for yourself. Still, it's a good time to ask some questions. If you're near retirement, are you too concentrated in tech stocks? This is a question that even indexers should ask since about one-third of the S&P 500's market value lies in just seven companies. Should I follow the lead of institutional investors spreading their bets outside of the United States, or even Berkshire Hathaway, which now has the most cash on the books of any company Bro ever? All of this is to say, how can I diversify my portfolio to take some of the bite out of bear markets?

Robert Brokamp: Well, there are plenty of investments that may add some balls to your portfolio, and we're going to talk about the most popular candidates. But I first want to talk a little bit about diversification in general. We're going to talk about what diversifies a portfolio for what I see as the typical Motley Fool investor who owns stocks primarily in the S&P 500, which, as you mentioned, Ricky, has a tilt toward growth leaning tech-oriented, tech adjacent companies, and a lot of our listeners also own those companies outright. That's the starting point here. I do want to emphasize that diversification is somewhat of a double-edged sword. You often have to own a diversifying asset through many stretches of, frankly, pretty mediocre ho-hum performance in order to eventually get the payoff. Then as I talk about these various things, I do think it's important that when you're looking for a diversifier, it's helpful to know how they perform basically during past market downturns, and over the last 25 years, there's been a good range of examples to see how investments perform during different types of bear markets. We had longer ones such as the dotcom crash and the Great Recession of 2007-2009. Market dropped more than 50% then. I took more than five years for the market to recover. But then we've also had shorter ones like the pandemic panick and 2022. With all that said, here are some diversifiers to consider, and I'm going to give each a letter grade.

Ricky Mulvey: What's the grade then for the dividend payers?

Robert Brokamp: I'm going to give dividend payers A, B, and here I'm talking about a diversified mix of companies that have paid a consistent and growing dividend for many years, and many have an above average yield. With the current yield on the S&P 500 being 1.3%, it doesn't take much to have an above average yield. It's not necessarily the dividends themselves that make these good diversifiers, though, getting a reliable stream of income is nice, especially since historically that stream will outpace inflation, it's that these types of companies tend to be more value-oriented, a little less volatile than the overall market, and score high on other factors such as quality, which is dined by different people in different ways. But basically comes down to a company that is profitable. The earnings growth is less volatile and they have a strong balance sheet, meaning not a lot of debt. I recently looked at the returns of the 10 biggest dividend focus ETFs, and they're all down this year, but not as much as the overall market. In 2022, when the S&P 500 was down almost 20%, NASDAQ was down more than 30%. The losses in these ETFs were in the single digits, and a couple actually made money. That's it. The diversification among dividend payers is important. During the Great Recession, some of the best dividend payers were financial stocks, and they got walloped. You definitely want a diversified portfolio of dividend payers.

Ricky Mulvey: Our colleagues, Matt Argersinger and Anthony Shavon, who run our dividend investing in service would also tell you that dividends are great for companies to pay because they make them a little bit more disciplined on capital allocation decisions when they're not maybe pursuing growth at all costs, and they have to return a little something to their shareholders. Another idea, international stocks, getting outside the United States. Bro, how are you feeling about these? What's the grade right now?

Robert Brokamp: I'm going to give them a C plus, which doesn't sound great, though, I think most people should have a little bit of international exposure. I'm giving them a C plus because, frankly, over the past 15 years, it's been tough to argue for international stocks. US stocks have outperformed them by some measure, it's a historical amount. But looking longer-term, there are many long-term periods, several years, even a decade or more, when international stocks outperform US stocks. You could saw it in parts of the '70s, the '80s, and the early 2000s, and looking very short-term, the total non-US stock market is actually up 8% so far this year, while US stocks are down, developed market stocks are doing even better, returning almost 11%. I do think there's something special about the American economy, and it explains why US stocks have outperformed the vast majority of other national stock markets over the last century or so, which is why I'm giving international stocks a C plus when it comes to diversification. But there's no question that there are long stretches when international stocks will do well, and they're certainly a lot cheaper these days than US stocks when you look at P/E or dividend yield or anything like that, which is why I personally have between 15 and 20% of my portfolio overseas.

Ricky Mulvey: The next one is a big one. We could be talking multifamily REITs, rental properties, office buildings. We could be talking about the Vanguard entire real estate index fund, but I'll make it easy for you, Bro. How are you feeling about real estate?

Robert Brokamp: As you hinted at, there are all real estate, so I'm going to give it a range of grades from C plus to B plus, depending on the type of real estate. A few weeks ago, we did an episode on what happens to different types of assets during a recession. We cited research which actually found that home prices actually hold up well. In fact, they tend to do better during bear markets and stocks than during bull markets with the very notable exception, of course, a 2007-2009 recession when both the economy, the stock market, and home prices collapsed. But usually, over the long-term, residential real estate, whether it's your own home or perhaps investing in rentals, can provide some excellent diversification. Now, you hinted at REITs, real estate investment trust. These are stocks and companies that own and operate real estate. It can be all real estate: apartment buildings, medical facilities, office facilities, storage, and they can be a good portfolio diversifier as well, though, like international stocks, man, they have lagged the S&P 500 for a good while now. Their diversification benefits can be mixed. They did very well during the dotcom crash and the ensuing recession, but also they were part of the real estate bubble, and boy, they got pummeled in 2008. As a starting point, I think it makes sense to have maybe a 5% allocation to REITs, and you can use that Vanguard ETF that you suggested. That's what I choose, especially if you're close to in retirement since they have above average yields, but they're still moderately to highly correlated to the overall stock market, so the diversification benefits are going to be mixed.

Ricky Mulvey: This next one has been on a run. Two investments over the past 12 months. One of these has returned about 7%. The one that I'm talking about now has returned 42%. Bro, this is the comparison between what the S&P 500 has done over the past year and gold.

Robert Brokamp: It's been quite remarkable. I'm going to give gold a diversifying grade of C plus, though I could easily be moved to a B minus on this. Gold has been in the news a lot lately because, as you pointed out, the return has been exceptional. It's up 26% so far this year, based on the performance of the SPDR Gold Shares ETF, and as you may have seen on social media, it's actually returned about the same as the S&P 500 over the past 20 years, almost identical. Why am I giving it a C plus? Well, first of all, part of it is just philosophical. We at the full believe in owning businesses with products, services, innovations, they generate a growing stream of cash. Gold, on the other hand, just a piece of metal, pass some decorative industrial uses, but mostly you're just betting that someone will be willing to pay a higher price for it in the future, not because it's going to be generating more cash in the future, but you're just hoping that there'll be more demand. Gold has gone through some really long stretches of lousy performance. It did really well in the 1970s due to the high inflation, peaked in 1980, went the other direction, and it took around 25 years to get back to its 1980 peak. All that said, it is true that gold has done well during bear market in stocks. We're seeing that this year, saw in 2022, 2008, and in two of the three bad years during the dotcom crash. It's fine to own some Gold as a hedge against bear markets, which is why I own little myself. I own some of that SPDR Gold Shares ETF.

Ricky Mulvey: By the time you notice it's outperforming, maybe that means you're a little late to the party on gold, Bro? It is you're betting on someone to pay more for it than you are today. However, gold has been around for thousands of years that people have been accepting it is a store of value. A little bit more of a track record there than something like crypto or even the tulip bulbs I was trying to sell you before we were recording. Let's get to crypto, because this is one that is interesting, and some investors still see it as a store of value. Let's talk for hours about Bitcoin as a digital gold in this economy we live in.

Robert Brokamp: We could talk for hours. In terms of a grade, I'm giving this one incomplete. I'm going back to my teaching days. I just feel like I can't give it a grade right now because it's just too soon to say what diversification benefit you're going to get from crypto. We'll talk mostly about Bitcoin, but as you know, there's so many varieties of it. It just doesn't have a long enough history for me. Bitcoin is flat for the year, which means it's doing better than in the stock market, so that's good news. But in 2022, it plummeted more than 60%. For me, the jury's still out. There's no question that it is gaining wider adoption, both in terms of by investors, by countries, and it's boosted by the availability of ETFs to make it easier to invest. I'm more comfortable investing in it than I would have been maybe three or four years ago. But the value of it as a diversifier is pretty much still unproven.

Ricky Mulvey: How about as a strategic reserve? Moving on. Let's get to alternatives, however you define them.

Robert Brokamp: This is a very broad category that can include really all investments that aren't commonly held by everyday investors. We're talking commodities, managed futures, currencies, hedge funds, private equity, and so on. For the most part, it's difficult or expensive for the regular investor to buy into these types of investments, and you're often not getting the cream of the crop. You're getting what's left over. Depending on how you invest in them, they keep illiquid and/or endure really long periods of bad or at least mediocre performance. For most people, I don't think they're necessary. However, I will add that the proponents of these types of investments do make some good points. Primarily, they say that a standard portfolio of stocks and bonds isn't as diversified as some people think because they often rely on a single factor like the overall economy or maybe just the movement of interest rates. We saw that in 2022 when interest rates skyrocketed and stocks and bonds fell. If you have the time and the inclination to research more about alternatives, you actually might find some things that strike your fancy. Just be prepared to pay higher fees to hold on to something that will behave very differently from a standard portfolio, which, I guess is the whole point.

Ricky Mulvey: The next one is Uncle Warren's one of his favorites right now, and that is just cash, Bro.

Robert Brokamp: Cash is boring, but I'm going to give it at an A, front of the class. I won't belabor this, cash is king or queen when times get tough. It's the only investment that you can feel reasonably sure won't drop in value. Just make sure you're putting in the effort to get the highest yields possible, which these days is close to or around 4%, and you're going to have to accept the fact that returns will never be great. When you invest in cash, you're making a trade-off. You're choosing lower return certainty over the unpredictable possibility, and you can even say historical probability that you'd earn a higher return in stocks given enough time. But for money you need in the next few years that you want to make sure holds up in value, it's hard to beat cash.

Ricky Mulvey: Another way you can take your money out of the stock market is to put it in bonds. Bro, there are some higher-yielding bond funds that look pretty attractive to me.

Robert Brokamp: This is why I'm giving this a range of grades, actually, from C minus to A. Because when it comes to bonds, the returns will depend on the issuer, the duration, meaning short or long-term, shorter-term bonds are going to be less volatile, longer-terms are much more volatile and how you own them, individual bonds versus bond funds. But let's start with the safest and move on to the riskiest. US treasuries are considered very safe, maybe not as safe as they were like five years ago, Fitch and S&P have downgraded them, and Moody's made some announcement recently about they might be doing some things as well, but they're still considered the safest investments in the world. Investment grade corporates are considered safe. Not super safe, but safe. Then you have below investment grade corporates, otherwise known as junk, and they're very risky. This is where you get the higher yields. You'll get much higher yields from junk bonds and somewhat higher yields from corporates, but you got to understand that they will often go down during recessions, and junk bonds really go down.

I'm going to talk about 20% or more during the tough times. Bonds are holding up pretty well this year, by the way, returning around 3%, but they've been disappointing over the past several years. In fact, it's really been one of the worst stretches for bonds in US history. I would say the future looks brighter, but if you want more certainty from bonds, explore investing in individual bonds because you know exactly how much interest you're going to get. How much you're going to get back when the bond matures at maturity date, assuming the issuer is still in business, of course. I would also explore what are known as either target date bond funds or defined maturity bond funds. These only owned bonds that mature in the same year. That way you have a little bit more certainty about what they'll be worth when that year arrives. The two biggest issuers of these ETFs are iShares and Invesco.

Ricky Mulvey: Bro, junk bonds are how I started my casino chain. Let's wrap it up with annuities.

Robert Brokamp: Yes, annuities. Not everyone's favorite topic, but let me explain. I'm going to give these an A for the right people. When I mean annuity, I'm saying anything that sends you a regular check in retirement for the rest of your life. In the original versions of annuities, you'd get that check or that payment every year. You'd get it annually, which is why they're called annuities. We all get some of this. By this, I'm talking about Social Security. Yes, Social Security is in trouble. People in their 50s and younger may not get everything they're promised, but you'll get most of what you're promised, and you'll get that check every month, regardless of what's happening in the stock and bond markets, it adjusts for inflation. It's partially tax-free. I think if you can maximize your Social Security benefit to some degree, that is a great diversifier in retirement. Same principle if you're getting a defined benefit pension, the traditional pension. If you can maximize that, that's good. Now, you can buy more, actually buying annuity from an insurance company. But the only annuity that appeals to me personally it's called a single premium Immediate annuity. You hand over a lump sum, say, $100,000, and you'll get $68,000 a year for the rest of your life. You give up a lot of liquidity, so don't do it without understanding the loss of liquidity when you do that. If you choose to go that way, you take that money from the portion of your portfolio that would otherwise have been taken from the bond part of your portfolio.

Ricky Mulvey: Very good. Robert Brokamp, appreciate being here. Thanks for your time and insight.

Robert Brokamp: My pleasure, Ricky.

Ricky Mulvey: As always, people on the program may have interests in the stocks they talk about in the Motley Fool may have formal recommendations for or against, don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and are not approved by advertisers. The Motley Fool only picks products that would personally recommend to friends like you. I'm Ricky Mulvey. Thanks for listening. We'll be back tomorrow.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jason Moser has positions in Amazon and PayPal. Ricky Mulvey has positions in Chewy, Netflix, PayPal, and Spotify Technology. Robert Brokamp has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Berkshire Hathaway, Bitcoin, Chewy, Costco Wholesale, Moody's, Netflix, PayPal, Spotify Technology, and Walmart. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short June 2025 $77.50 calls on PayPal. The Motley Fool has a disclosure policy.

Who's afraid of punitive tariffs?

Not Coca-Cola (NYSE: KO), it seems. The beverage titan -- and, by the way, longtime stock holding of Warren Buffett's influential Berkshire Hathaway -- just posted first-quarter results and stated the current trade war will have a negligible effect on its business. Let's take a glance at the quarter and dig into whether its shrug at the tariffs is justifiable.

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Flat Coke

Coca-Cola popped the tab on its Q1 results Tuesday morning, revealing that it earned net revenue of $11.1 billion. That was down by 2% on a year-over-year basis, although overall global case unit volume rose at the same percentage rate.

On the bottom line, the company's "comparable" (non-GAAP, or adjusted) net earnings inched up by 1% to $0.73 per share. The company did not, for some reason, provide total net income figures.

Regardless, the numbers published were more or less in the neighborhood of analyst estimates. Pundits tracking the stock were collectively modeling slightly higher revenue of $11.2 billion but underestimated adjusted earnings at $0.72 per share.

This most global of companies saw unit case volume grow in markets such as Europe, Middle East, and Africa (EMEA), where it notched a 3% improvement over the same quarter of 2024. It did even better in Asia Pacific; all global drink categories rose in the region, powering 6% overall growth. On the down side, the company flat-lined in Latin America and suffered a 3% drop in its native North America.

Talking about tariffs

But what's on the mind of many investors is not the state of the global beverage industry or the spending habits of Asian soft drink consumers. It's the effect of the tariffs that have been imposed by the current U.S. presidential administration, and the retaliatory levies fired back by the targeted nations.

In both its earnings release and the conference call that covered its Q1 performance, Coca-Cola sounded a confident note about its ability to endure the trade war. Within its full-year guidance, it set something of a tone by stating the conflict's impact on its business will be "manageable."

That's because, unlike companies that rely on inputs made abroad and imported, Coca-Cola's operations tend to source what they need locally.

In the conference call, CEO James Quincey said that "if we were to take the U.S., for example, we are exposed on a couple of inputs like orange juice or some of the dispensing equipment we buy. Our bottling system is a bit exposed to some of the resin and aluminum."

"But these are small pieces relative to the total size," he added.

Putting its guidance where its mouth is, management left most of its forecasts unchanged from the ones in the previous quarterly report. These included adjusted earnings-per-share growth of 2% to 3% over the $2.88 of 2024, and an adjusted cash-flow figure of roughly $9.5 billion.

Net revenue should experience a "currency headwind" of 2% to 3% in addition to slight negative impacts from acquisitions, divestitures, and "structural changes." That's actually an improvement over the previous guidance that anticipated 3% to 4%. Either way, at such rates, those factors won't have a crushing impact on the top line.

Hail to the beverage king

Like Buffett, who first loaded up on Coca-Cola for Berkshire's equity portfolio in 1988, I've been a longtime bull for the stock.

Q1 was forgettable, especially when compared with the solid growth the company posted in the previous frame. Still, the company is a powerhouse. It's got an unassailable moat as the No. 1 soft drinks purveyor in the world, and despite a flat quarter, it's still kicking out plenty of cash from its operations.

That gushing geyser of greenbacks allowed the most regal of Dividend Kings to recently declare a dividend raise. This amounted to 5% over the preceding one, a rather high figure given the long streak of lifts (now 63 and counting) plus the scope and scale of its business. The dividend currently yields 2.8%, which is well above the average yield of S&P 500 index component stocks.

While the tariff war rages, investors will be understandably worried about how it affects their equity holdings. With its limited exposure to trade hiccups, Coca-Cola looks very attractive as an investment, and it's likely folks will gravitate to it on that basis alone. I can imagine some people either ditching more tariff-impacted stocks in favor of the stock or building a new position with available capital.

Given that, plus the always-attractive dividend that's constantly on the rise, I'd give Coca-Cola shares a better-than-average chance of increasing in price during the trade war. The longer the tussle goes on, the more the company's appeal is sure to grow. As ever, I'd be a buyer of the stock -- especially now.

Should you invest $1,000 in Coca-Cola right now?

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.

VeriSign (NASDAQ: VRSN) shares took off Friday morning after the company released first-quarter earnings and declared a dividend for the first time. Its solid results also allowed the company to raise revenue guidance for the full year.

Investors jumped into what has been one of the big stock market winners so far this year. Shares jumped 9.3% higher as of 11:35 a.m. ET, giving the stock a gain of 33% year to date.

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VeriSign is a big Warren Buffett holding

The initiation of a quarterly cash dividend surely made shareholders happy, too. That group of investors includes Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B).

VeriSign isn't what most investors would picture as a Buffett holding. The company manages internet domain names and provides critical internet infrastructure for managing and maintaining security. Buffett typically steers clear of technology stocks, but Berkshire has owned VeriSign for more than a decade, and it added to its VeriSign holding in the fourth quarter. That holding was valued at about $2.75 billion at the end of Q4, putting VeriSign just out of Berkshire's 10 largest holdings.

Shareholder-friendly moves

Buffett likely continues to be happy with VeriSign's business. The company saw both revenue and operating income grow almost 5% year over year. It raised 2025's full-year guidance for both of those metrics as well.

VeriSign also declared a cash dividend of $0.77 per share, giving the stock a forward dividend yield of about 1.1%. It also repurchased 1 million shares at an average price of $230 per share. Those are signs of a company with strong free cash flow. The share repurchases should continue, as VeriSign still had almost $800 million authorized for that purpose as of the end of the quarter.

This is a company that has been delivering consistent financial results with strong cash flow. And note that it should feel minimal impacts from the current tariff uncertainty. It's not immune to currency fluctuations and economic slowdowns, but it looks to be a good stock to own right now.

Should you invest $1,000 in VeriSign right now?

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Howard Smith has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway and VeriSign. The Motley Fool has a disclosure policy.

Warren Buffett regularly provides investing wisdom through his annual letters to Berkshire Hathaway shareholders, his TV interviews, and through the occasional newspaper editorial. And as you might expect from someone who has an outstanding track record of beating the market during stock market downturns, many of Buffett's quotes are excellent advice to use during corrections like the one we're in now.

5 Great Warren Buffett quotes for a stock market correction

Without further delay, here are some great Warren Buffett quotes to keep in mind when the market gets turbulent.

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1. "Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble."

Historically, stocks go up more than they go down. The average bull market since 1932 lasted nearly five years, while the average bear market lasts just 1.5 years. And the sharpest stock market drops last just days or weeks in many cases – just look at the chart of the initial COVID-19 crash:

^SPX data by YCharts

The massive plunge in the 2-day period after President Trump's reciprocal tariff announcement is another example.

One good strategy is to keep some cash on the sidelines so you can pounce on opportunities like these. It can certainly be scary when they're happening, but how many people wish they had bought more stocks in March 2020, or in 2008 when the financial crisis first started?

2. "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

This is a Buffett quote that applies regardless of whether we're in a stock market correction or not, but it can be especially apparent during turbulent times why Buffett said it. Great businesses with leading market shares, stable cash flow, and excellent leadership tend to hold up better during market downturns. It's also a smart idea to brush up on some value investing principles that can help you separate the wonderful companies from everything else.

This quote also applies when bargain-seeking during downturns. Buying a tried-and-true market leader at 15% below its high can be a smarter move than buying an unprofitable business for a 30% discount.

3. "Price is what you pay. Value is what you get."

If a stock on your radar is down for no other reason than the overall market or sector is weak, or because of some temporary economic factor like higher interest rates, it can be a great time to buy. But if a stock's price is down because something in its business weakened, it can be wise to stay away.

For example, many of the best-performing stocks of the initial artificial intelligence (AI) boom are now trading for less than half of their recent highs. But it isn't for no reason – it's because we're seeing significant softening in demand for data center space and other AI infrastructure.

In other words, not every stock that is trading for a lower price in a downturn is a true bargain.

4. "Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be a more productive than energy devoted to patching leaks."

It's never a good idea to sell a stock just because it went down. But if a decline in a stock's price is accompanied by a change in your investment thesis, it could be a good idea to sell and move on, not to throw more money at it because it looks cheap. An example in the current market environment might be a stock that could be especially vulnerable to China tariffs. Or if a recession comes, a cyclical business that is highly dependent on discretionary spending could be one to take a closer look at.

Of course, not all stocks that fall in these two categories necessarily need to be sold. But the point is that if your investment thesis is busted, it can be a perfectly good reason to move on – regardless of how cheap a stock looks after a decline.

5. "The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd."

When we see our friends making money hand-over-fist in stocks, it's human nature to want to put all our money in as well. And when everyone else is panicking and selling stocks, it's our instinct to sell before things get any worse. It's common knowledge that the central goal of investing is to buy low and sell high, but our emotions try to make us do the exact opposite.

What Buffett is saying here is to trust your own analysis and research, not what your friends, or some market commentator on TV is telling you to do. By purchasing shares of great businesses at fair prices and holding them for as long as they remain great businesses, stock market corrections are your friend as a long-term investor.

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Matt Frankel has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.

Warren Buffett is one of the most successful investors of all time, with a performance that easily surpasses the S&P 500's average. His holding company, Berkshire Hathaway, presents a valuable snapshot of the companies he believes in.

Below, I'll explore why e-commerce giant Amazon (NASDAQ: AMZN) could make an excellent long-term pick in this uncertain macroeconomic environment.

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Buffett was somewhat late to the party

While Warren Buffett is a hugely successful investor, he isn't infallible. Berkshire Hathaway passed on the opportunity to bet on Amazon when it was just a start-up in 1994, and again when the stock went public in 1997 at just $18 per share ($0.075, adjusted for stock splits). Buffett finally pulled the trigger in 2019 and now owns roughly $1.7 billion in shares.

In the past, Buffett may have seen Amazon as a speculative business with an uncertain future. However, the company now aligns more closely with his conservative investment strategy thanks to its deep economic moats, which are the competitive advantages it has over rivals in several different industries.

Amazon's biggest advantage may be its sheer scale. The larger a company becomes, the easier it is for management to take advantage of efficiencies to reduce costs and pass on savings to customers. It also creates a network effect, as more customers attract more merchants and a wider variety of items. This, in turn, attracts even more customers.

Amazon's scale advantages aren't limited to just e-commerce. The company is also a leader in cloud computing through Amazon Web Services (AWS), which holds a 30% global market share. In recent years, it has leveraged this to become a leader in generative artificial intelligence (AI) by allowing clients to access computing power for running and training large language models (LLMs) within AWS.

The numbers look good

While investors shouldn't expect Amazon stock to repeat the 675% gain it achieved over the past decade, the company can maintain its market-beating performance over the long term due to its strong fundamentals and reasonable valuation. First-quarter revenue jumped 10% year over year to $187.7 billion, driven by particular strength in AWS, which is benefiting from rising demand for AI-related workloads.

It's unclear how this business will play out over the long term. However, Amazon is investing heavily in the opportunity by buying more of Nvidia's AI chips. It also builds custom chips called Trainium and Inferentia, which are designed to reduce the company's dependence on third parties and run specific workloads more efficiently than one-size-fits-all solutions.

The best thing about Amazon's AWS-led growth is its higher profitability, compared to e-commerce. Fourth-quarter operating income jumped 61% to $21.2 billion, with approximately half of the total coming from the AWS segment.

Amazon is working to boost profitability across its businesses by implementing cost-cutting measures. It aims to slash around 14,000 managerial positions this year, aiming to save between $2.1 billion and $3.6 billion annually.

What are the potential challenges?

Amazon's biggest near-term challenge may come from macroeconomic uncertainty. The Trump administration's on-again, off-again tariffs could cause consumer prices to rise temporarily, potentially hurting demand. Furthermore, the unpredictable policy will make it hard for companies to plan their supply chains and make investments for the future.

That being said, Amazon's growing reliance on AWS, its cloud computing segment, shields it from much of this tariff-related uncertainty. Furthermore, with a forward price-to-earnings multiple (P/E) of 26, the company's valuation appears to account for much of these fears.

While shares are pricier than the Nasdaq-100 estimate of median of about $24, Amazon deserves a premium due to its deep economic moat and impressive bottom-line momentum. It's easy to see why Warren Buffett is a fan.

Should you invest $1,000 in Amazon right now?

Before you buy stock in Amazon, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Amazon wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $532,771!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $593,970!*

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*Stock Advisor returns as of April 21, 2025

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Berkshire Hathaway, and Nvidia. The Motley Fool has a disclosure policy.