Shares of Warren Buffett’s company, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), were recently trading at levels not seen in years, making them rather attractive for long-term investors.
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 about $125 billion in cold, hard cash. More importantly, 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
Q: Is it smart to sell my low-dividend-yield stocks and buy more high-yield stocks? – R.P., Farmington, New Mexico
A: 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 those 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.
To see dividend-paying stocks the Motley Fool has recommended, check out our “Total Income” service at Fool.com/services.
Q: How are stockbrokers paid? – M.B., Norfolk, Virginia
A. 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 paid via salary, commissions on sales, incentive bonuses and advisory fees; the mix depends on the company they work for. Brokers who depend heavily on commissions can cost you quite a bit, if they encourage you to trade frequently.
My dumbest investment
My dumbest investment was jumping onto the Bitcoin train near its all-time high – when I knew nothing about cryptocurrencies. I was hoping it would continue to skyrocket, but shortly after I got in (at about $19,000 per token), it crashed. Lessons learned: Don’t be a sheep following the herd, and learn before you earn! – M., online
The Fool responds: Those are two excellent lessons. It’s always best to think for yourself when investing, because lots of people in the crowd don’t know what they’re doing. Indeed, if they panic about a short-term problem facing a company and sell out of it, that can be a good time to buy – while if they greedily snap up shares of a company, sending the stock price soaring, it’s often best to steer clear, as it’s likely overvalued and may soon fall.
Many people have invested in Bitcoin and other cryptocurrencies without really understanding them – and they’re not easy to understand. They’re also highly volatile and risky, and are best avoided by most of us.
Bitcoin was briefly above $20,000 per token in late 2017, only to dip below $6,000 a few months later and end up near $3,000 a year later. More recently, Bitcoin has been trading near $9,000. You can learn much more about investing in Bitcoin and cryptocurrencies from The Motley Fool. Try visiting this address: Mot.ly/crypto-things-to-know.