This Magnificent Stock Has Made Many Millionaires and Could Make More

Warren Buffett's investing resume is about as good as it gets. Buffett has been an investor for more than 70 years, accumulating an enormous fortune worth an estimated $147 billion today. Most of that wealth is from his holding company, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), which Buffett has led as chief executive officer since 1970.

Investors who have entrusted Buffett with their money have been handsomely rewarded. Berkshire Hathaway has returned more than 233,000% since 1980! Just $1,000 invested back then would have made you a multimillionaire today, so it's safe to say that Buffett's work has made many millionaires.

However, past performance does not guarantee future returns, and Buffett himself won't be around forever. Still, Berkshire's recent moves make it hard to doubt its future wealth-generating potential.

Here is why Berkshire can still create life-changing investment returns for patient investors.

Succession in motion

Warren Buffett is the face of Berkshire Hathaway, so most investors are probably concerned about what Berkshire would be like without Buffett, who is 94 years old today. Buffett is one of the world's most famous investors, who is probably as close to a household name as it gets for Wall Street personalities.

Technically speaking, yes, there is some degree of risk in Buffett's age. After all, he did build Berkshire into the trillion-dollar empire it is today, so his successor must continue to lead the ship after he's gone. Fortunately, that process is already underway. Buffett named Greg Abel Berkshire's new chief executive in 2021 and noted that he's already essentially running the company with the exceptions of the insurance business and critical investment decisions.

Abel has been at Berkshire for over 25 years and is Buffett's protege. Again, it doesn't promise Berkshire's future success, but fears of Berkshire crumbling after Buffett's gone are likely overblown. The company is so diversified and fundamentally sound that it probably deserves a hefty benefit of the doubt until it proves otherwise.

It's almost sure that Berkshire's model -- steadily collecting quality business assets at attractive prices and holding them for as long as possible -- will not change.

No company is better poised for an opportunity

Berkshire invested significantly in Apple in 2016, and it's been a home run that did so well that it represented about a fifth of the company's entire market cap earlier this year. However, Buffett has aggressively trimmed Berkshire's investment portfolio, including Apple. Berkshire's Apple stake is worth about $67 billion today, less than 10% of Berkshire's market value.

This is a big deal for two reasons. First, it significantly reduces Berkshire's risk as an investment. Had Apple stock collapsed while it represented such a huge portion of Berkshire's value, it could have cratered Berkshire stock with it. Now, that's much less of a concern, which makes Berkshire stock more appealing.

Additionally, it has helped Berkshire amass arguably the most significant cash hoard Wall Street has ever seen. The company now has about $325 billion in cash and equivalents on the books, a staggering financial war chest that gives Berkshire nearly endless options. It's enough money to acquire almost any company outside the "Magnificent Seven."

Perhaps most importantly, it positions Berkshire to pounce on future opportunities. The Apple investment helped grow Berkshire to a trillion-dollar valuation. Eventually, Berkshire must deploy that cash in a manner that creates enough value to continue reaching new heights. The company is more financially prepared than ever before for when the time comes.

Millionaires won't be made overnight

A trillion-dollar company probably won't produce the returns needed to create life-changing wealth quickly. Instead, it will probably be a slow-and-steady journey that takes decades.

Still, Berkshire is as good a bet as any to get there. The holding company owns dozens of private businesses (and stakes in public companies) in industries critical to the economy, like insurance, energy, railroads, manufacturing, and retail. The only thing missing might be that next game-changing move, Berkshire's next Apple investment. It's a tall task, but Berkshire finally has the financial firepower to make it happen.

Berkshire is a world-class business; high-quality companies tend to make investors rich if you wait long enough. Unfortunately, Berkshire's price might not be right today.

The stock trades at about 1.6 times book value, near its highest ratio in a decade. Buffett himself didn't repurchase any of Berkshire's shares in Q3. Buying at an attractive valuation is essential for outsized investment returns when you invest in mega-cap stocks like this. It's always OK to nibble, especially if you practice dollar-cost averaging. Just make sure you save some cash for when better buying opportunities emerge.

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