BRK.B Stock Outperforms Industry, Trades at a Premium: Should You Buy?

Shares of Berkshire Hathaway Inc. BRK.B have gained 12.1% year to date, outperforming the industry’s increase of 11%. However, the stock has underperformed the Finance sector’s gain of 13.2% as well as the Zacks S&P 500 composite index’s rise of 17.6% in the same time frame.Berkshire Hathaway is a conglomerate with more than 90 subsidiaries engaged in diverse business activities. This provides it stability in various economic cycles.BRK.B is now trending below its 50-day simple moving average (SMA), indicating the possibility of a downside ahead.BRK.B vs Industry, Sector, S&P 500Image Source: Zacks Investment ResearchBRK.B’s peer, Chubb Limited CB, has gained 7.1% year to date, while another peer, The Progressive Corporation PGR, has lost 6.1% year to date.Chubb, a premier global provider of property and casualty insurance and reinsurance, is targeting growth in the middle-market segment across domestic and international regions. Chubb is enhancing its core package solutions and expanding its specialty insurance portfolio. With focused strategic initiatives, Chubb seeks sustainable growth and stronger competitive positioning.Progressive, one of the top auto insurers in the United States, is well-positioned to sustain profitability through its strong market presence, broad product offerings and disciplined underwriting. Progressive is advancing its strategy by promoting bundled auto insurance, limiting exposure to high-risk properties, and enhancing segmentation with targeted, innovative solutions. With this approach, Progressive continues to strengthen its competitive edge.BRK.B Shares Are ExpensiveThe stock is overvalued compared with its industry. It is currently trading at a price-to-book multiple of 1.57, higher than the industry average of 1.53.  Image Source: Zacks Investment ResearchBerkshire is relatively cheap compared to Progressive but expensive compared to Chubb.Average Target Price for BRK.B Suggests UpsideBased on short-term price targets offered by four analysts, the Zacks average price target is $537.75 per share. The average suggests a potential 5.7% upside from the last closing price.Factors to Note for BRK.B StockBerkshire Hathaway’s insurance segment is the backbone of its operational model and contributes roughly a quarter of total revenues. This segment remains a key driver of long-term growth, supported by disciplined underwriting practices, an extensive market presence and a demonstrated ability to perform well even under challenging economic conditions. This segment produces significant underwriting “float” that Warren Buffett has long leveraged for investments.  Berkshire Hathaway’s strong insurance foundation is reinforced by the performance of its other major business lines. Berkshire Hathaway Energy (BHE), the company’s regulated utility division, produces consistent cash flows and continues to broaden its investment in renewable power—supporting long-term global trends toward electrification and sustainability. Within this division, Burlington Northern Santa Fe (BNSF), Berkshire’s rail subsidiary, remains a strategically vital player in U.S. freight transport. Although BNSF is currently contending with a less favorable freight mix and reduced fuel surcharge revenue, it continues to represent a durable long-term asset, underpinned by steady utility demand and the critical role of freight infrastructure.The Manufacturing, Service, and Retail segment offers additional cyclical upside. This group stands to gain from an improving economic environment and stronger consumer spending, both of which can lift revenue growth and expand profit margins.Financially, Berkshire has one of the most conservative capital allocation strategies in the market. It holds more than $100 billion in cash, with roughly 90% invested in short-term U.S. Treasuries and other government-backed securities. While higher interest rates have boosted investment income, the Federal Reserve’s anticipated rate cuts should help maintain liquidity and support returns. This disciplined positioning allows Berkshire to quickly pursue acquisition opportunities while preserving a stable yield profile.Berkshire has also been actively reshaping its equity portfolio—exiting BYD, trimming Apple and Bank of America holdings and increasing investments in Japanese trading houses like Mitsubishi and Mitsui. Recently, Berkshire bought shares in Alphabet, one of the most innovative companies in the modern technological age and one of the Magnificent Seven stocks. These moves emphasize management’s focus on stable, cash-generating assets that support future share buybacks and reinvestment.Finally, Berkshire’s expanding insurance float—rising from $114 billion in 2017 to $176 billion by end of third-quarter 2025—continues to provide low-cost capital, fueling investments in durable, high-return assets and reinforcing its strong balance sheet and shareholder value creation.Berkshire Hathaway’s Return on CapitalReturn on equity (“ROE”) in the trailing 12 months was 7.3%, underperforming the industry average of 8%. Return on equity, a key profitability measure, reflects how effectively a company utilizes its shareholders’ funds. It is noteworthy that though BRK.B’s ROE lags the industry average, the metric has been improving consistently.The same holds true for return on invested capital (ROIC), which has increased every year since 2020. This reflects BRK.B’s efficiency in utilizing funds to generate income. However, ROIC in the trailing 12 months was 5.9%, lower than the industry average of 6.2%.Mixed Analyst SentimentThe Zacks Consensus Estimate for 2025 earnings implies a 5% year-over-year decrease, and the same for 2026 suggests a 4.2% decrease. The consensus estimate for 2025 earnings has moved up 3.2% in the past 30 days, while that for 2026 has moved down 3.4% in the same time frame.Image Source: Zacks Investment ResearchParting Thoughts on BRK.B SharesBerkshire Hathaway has long added strength and stability to investors’ portfolios, delivering consistent shareholder value for nearly six decades under Warren Buffett’s leadership.The attention now turns to the company’s future as Greg Abel prepares to step in as CEO on Jan. 1, 2026, with Buffett continuing as executive chairman.However, with Berkshire trading at a premium valuation, witnessing modest returns on capital, facing near-term earnings headwinds, and having a mixed analyst sentiment, a wait-and-see approach seems prudent for this Zacks Rank #3 (Hold) stock.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Free Report: Profiting from the 2nd Wave of AI ExplosionThe next phase of the AI explosion is poised to create significant wealth for investors, especially those who get in early. It will add literally trillion of dollars to the economy and revolutionize nearly every part of our lives.Investors who bought shares like Nvidia at the right time have had a shot at huge gains.But the rocket ride in the "first wave" of AI stocks may soon come to an end. The sharp upward trajectory of these stocks will begin to level off, leaving exponential growth to a new wave of cutting-edge companies.Zacks' AI Boom 2.0: The Second Wave report reveals 4 under-the-radar companies that may soon be shining stars of AI’s next leap forward.Access AI Boom 2.0 now, absolutely free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Chubb Limited (CB): Free Stock Analysis Report Berkshire Hathaway Inc. (BRK.B): Free Stock Analysis Report The Progressive Corporation (PGR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks