Waiting for a Better Price on Berkshire Hathaway? Here's Why You Shouldn't

Wall Street icon Warren Buffett was trained by an icon of a previous generation, Benjamin Graham. One of Graham's most important concepts wasn't actually about picking stocks, it was about managing emotions. Basically, he explained that you are often your own worst enemy. That's something to consider if you have been thinking about buying the stock of the company Warren Buffett runs, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B). Here's why buying right now might be your best bet.

Warren Buffett provides a warning to investors

Although Warren Buffett doesn't like to talk too much about his investment thoughts, there is one place where he is surprisingly candid about them -- Berkshire Hathaway's annual report. Reading through the decades of annual reports he has penned is probably more valuable than reading most "how to invest" books.

Image source: The Motley Fool.

In the 2023 report, Buffett made a startling admission: "All in all, we have no possibility of eye-popping performance." The reason for this, as he tells it, is that Berkshire Hathaway is so large -- it has a $980 billion market cap -- that very few companies it could acquire would move the needle.

This suggests that even Buffett thinks that now might be a bad time to buy Berkshire Hathaway stock. If that's the case, shouldn't you listen to the advice of the man dubbed the Oracle of Omaha? Maybe not.

What is Berkshire Hathaway?

At its core, Berkshire Hathaway is a giant, sprawling conglomerate. It is filled with a wide variety of companies that Buffett bought or invested in because they met his investment criteria. To simplify, he prefers good companies that are trading at attractive prices. After buying them, he allows the managers to run them so Berkshire Hathaway can benefit from the long-term growth of the businesses. He gets involved only if he absolutely has to. That makes Berkshire Hathaway something like a mutual fund. And what you are buying when you add the stock to your portfolio is really access to Warren Buffett.

So what Warren Buffett is really telling investors is that there's no chance of "eye-popping performance" given the rich valuation of the market today. It is, perhaps, more a function of what Buffett can find to buy (remember, companies have to be well run and attractively priced) versus the size of the company he runs. What's Buffett doing about it? He's selling stocks to raise cash. That could be read as preparing for a time when valuations are more attractive.

When will valuations be more attractive? Perhaps during the next bear market. Buffett has a long history of investing while others are scared. If he sees a good company that's trading at an attractive price, he'll step in and buy it, even if most investors would be too fearful.

This is why buying Berkshire Hathaway today, even though it is expensive (as Buffett himself hints), could be a good decision. Berkshire Hathaway will likely look cheap during a bear market when you will have to overcome the weighty emotion of fear to add it to your portfolio. So right when you are least likely to buy, it will probably be the best time to buy. It will also likely be when Berkshire Hathaway is hunting for the investments that will help push its own business growth to a higher level.

BRK.A data by YCharts

If you want to own Berkshire Hathaway so you can invest alongside investment legend Warren Buffett, you should probably just grit your teeth and buy the stock now. Even if you just buy a small starter position, it will get you over the emotional hump that might cause you to pause, and perhaps miss the opportunity, during a bear market. Adding more to a position you already hold is probably easier than initiating a new position.

Graham was right, don't let it stop you from benefiting from his student

Benjamin Graham, often considered the father of securities analysis, was ahead of his time. Buffett benefited greatly from learning the craft of investing from him. You can benefit, too, if you recognize that you are your own worst enemy when it comes to investing because emotions are so difficult to control. If you want to own Berkshire Hathaway, which is trading near all-time highs today, you should at least consider a small purchase now.

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Reuben Gregg Brewer 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.