The Motley Fool Take
Shares of Warren Buffett’s company, Berkshire Hathaway, were recently trading at levels not seen in years, making them rather attractive for long-term investors. Its Class A shares, after reaching almost $350,000 per share, are down to the $270,000 range. Its Class B shares, which had traded at $230 earlier this year, are now around $180 per share.
Berkshire Hathaway is a diversified holding company with billions of dollars invested in dozens of stocks (including Apple, Bank of America, Coca-Cola and American Express), along with around $125 billion in cold, hard cash. More important, Berkshire has acquired dozens of solid companies over the years, with these subsidiaries including Benjamin Moore, Brooks Sports, International Dairy Queen, Justin Brands, McLane, Business Wire, Clayton Homes, Forest River, GEICO, Nebraska Furniture Mart, NetJets, See’s Candies, Shaw Industries and the entire BNSF Railway.
Berkshire Hathaway’s near-term performance will be challenged by the COVID-19 outbreak — its retail businesses in particular. But Berkshire also owns businesses that won’t be as affected by the coronavirus pandemic, such as its insurance and energy operations.
Meanwhile, Buffett is a master at making smart investments during market downturns — and he has billions at his disposal with which to do so. At age 89, he has spent decades building the company to last. He has succession plans in place, too, so Berkshire can keep growing for decades more. (The Motley Fool owns shares of and has recommended Berkshire Hathaway.)
Ask the Fool
From R.P. in Farmington, N.M.: Is it smart to sell my low-dividend-yield stocks and buy more high-yield stocks?
The Fool responds: Not necessarily. High dividend yields are certainly appealing, as they deliver significant income, but they’re not equally safe or attractive. Many solid companies pay out most of their earnings in dividends and sport fat yields. That’s great, and such stocks are good for people seeking income. But since a dividend yield is the result of dividing a stock’s annual dividend amount by its current stock price, a high yield can also reflect a stock that has fallen in price, possibly because the company is in trouble.
Also consider a dividend’s growth rate. A modest dividend today can be a fat dividend in a few years if the company is increasing its payout regularly and significantly, as many do. Some low-dividend stocks may be paying much fatter dividends within a few years.
From M.B. in Norfolk, Va.: How are stockbrokers paid?
The Fool responds: If you’re referring to brokerages, they make some money by charging trading commissions (though many brokerages now offer commission-free trading). Typically, they earn more from interest on client assets, interest on margin loans and fees for asset management and other services.
If you mean the humans who might call you and try to sell you an investment, or through whom you might buy or sell stock, they’re generally…