Where Will Berkshire Hathaway Be in 10 Years?

Do you ever think about where game-changing companies like Nvidia or IonQ will be in the future? You should. Such an exercise will help you determine whether you want to take on a stake in their stocks now. Their future needs to be convincingly bright to justify the steep valuations that many of them currently sport.

But what about less conventional and far simpler names like Berkshire Hathaway (BRK.A -0.58%) (BRK.B -0.64%), which is as much a mutual fund and private equity outfit as it is anything else? Although it’s rarely done, thinking about these organizations’ likely long-term futures makes just as much sense, only in a different way.

Here are some predictions as to where Berkshire Hathaway will be 10 years from now.

What is Berkshire Hathaway?

Most investors have certainly heard of it. Many investors may have even borrowed a stock pick or two from its publicly traded holdings that Warren Buffett himself may have hand-picked. But, what exactly is Berkshire Hathaway?

Although it holds a bunch of value stocks, including names like Apple, Bank of America, and Coca-Cola, it’s not a mutual fund. The conglomerate is simply trying to make the best use of cash it doesn’t need for anything else anytime soon, and quality stocks are Buffett’s preferred option. That’s why one-third of Berkshire’s current market cap of $1 trillion is made up of its individual stock picks.

Another third of Berkshire’s total value right now is cash. (Yes, Buffett and his lieutenants are lamenting that they aren’t finding much of anything they like well enough to invest in it at this time.)

As for the remaining one-third of this conglomerate’s current market cap, many casual investors are surprised to learn that Berkshire Hathaway owns dozens of relatively small privately run outfits — like Shaw Flooring, Geico Insurance, railroad BNSF, Clayton Homes, Dairy Queen, Fruit of the Loom, Duracell batteries, and Pilot Travel Centers.

Obviously, none of these are high-growth businesses like the aforementioned Nvidia. All of them, however, are reliable cash cows. And Buffett loves reliable cash flow, if for no other reason than that it helps build a cash hoard that can fund the organization’s next investments.

This is no small matter, either. Owning so many different cash-generating subsidiaries without worrying about their stocks’ performances (since they’re not publicly traded entities) allows Buffett to be very, very patient with Berkshire’s value stock holdings … often more patient than the average investor can afford to be.

Where will Berkshire be in 10 years?

It’s a detailed look worth taking to be able to make one of a handful of predictions about where Berkshire Hathaway will be 10 years from now. That is, its allocation between privately held and publicly traded companies will likely look about the same then as it does now. Indeed, even many of the specific holdings are apt to be the same, with Apple, BofA, American Express, and Coca-Cola still collectively accounting for over half the value of the publicly traded portion of Berkshire’s total value.

That’s not to say Berkshire itself will still only be a trillion-dollar organization then. Quite the opposite, actually. One could argue that by 2035, Berkshire Hathaway’s market capitalization will exceed $2 trillion, thanks to an economic backdrop that specifically favors its value stocks over growth stocks. Look for Berkshire Hathaway stock’s price to rise accordingly.

The multi-year era of cheap money that was a boon for high-growth tech stocks is over. With interest rates now closer to long-term norms — and likely to stay there for the foreseeable future, thanks to lingering inflation — value stocks like the ones Berkshire owns are primed to shine.

Investors are also likely to reward Berkshire’s value-oriented, privately owned businesses with a richer valuation of Berkshire shares themselves.

That’s the long way of saying it wouldn’t be surprising if Berkshire Hathaway shares widen their current performance lead on the broad market.

Other 10-year likelihoods are less pleasant to think about. Take Warren Buffett’s continued involvement with Berkshire as an example. At 94 years of age, the Oracle of Omaha simply isn’t in a position to continue offering guidance and wisdom for the indefinite future. Although his lieutenants and protégés have certainly embraced his way of thinking, it’s Buffett who provides the proverbial magic.

Finally, don’t be surprised if, by 2030, Berkshire Hathaway addresses its current frustration of not finding anything it likes well enough to invest in by wholly acquiring — and subsequently privatizing — an entire major company. Or two. Or more.

Investors haven’t seen this happen in a while, but it’s certainly not unheard of. Geico, BNSF, and Clayton Homes were all publicly traded outfits at one point. Buffett steered Berkshire into outright acquisitions of each because he saw long-term value worth wholly owning. Although it would take much bigger deals than these were to move the proverbial needle now, with over $300 billion in idle cash sitting on the books for several quarters, Berkshire Hathaway can afford acquisitions that are big enough to matter.

Just own it because it’s a high-quality prospect

Take all these predictions with a grain of salt, of course. No one owns a crystal ball. It’s possible that none of them will end up happening.

However, it certainly feels more likely than not that at least most of these outlooks will come to fruition to some degree.

More than anything, though, you’d still do well to appreciate the fact that Berkshire Hathaway is a high-quality investment prospect, no matter how many or how few of the expectations above actually take shape. With or without Warren Buffett’s ongoing direction, you’d be hard-pressed to find another, better option that you can tuck away in your portfolio for 10 (or more) years without feeling like you needed to keep a constant eye on it. That alone is a welcome change for plenty of people’s portfolios.