Chasing Value: Apple vs. Berkshire Hathaway -- A Dead Heat

Surprisingly, the year-to-date chart below shows as close to identical records as one could imagine, a dead heat. They begin and end together. How unusual? On a monthly basis the lead shifts back and forth for the year.





Okay, so now what? What is the better long term play? I still think Berkshire Hathaway is.

Let's first compare the metrics. Apple has a P/E of 18.79 and Berkshire has a P/E of 13.80. If they were in the same industry the numbers would speak for themselves. But I actually think that they are very similar in that they both represent discounts to their growth potential. I might even favor Apple with the higher P/E, on a relative basis. To better see this let's look at the PEG ratios. Apple is at 0.79, very much a bargain. Berkshire's PEG of 3.59 makes the case that Apple might be the better buy at this point.

Continuing, Apple has no debt and has banked $48 billion. Berkshire has very low debt and also has billions of dollars on reserve. Furthermore it also is one of the four triple A rated companies left. There is no separation here, with one caveat; Buffet would definitely have the advantage regarding allocation of resources. On the other hand Apple trounces BRK when it comes to ROE, ROA, and ROIC over the past 12 months -- distinction muted.

Neither company pays a dividend and none seems to be on the horizon.

In terms of P/CF they both exceed the market average. In terms of P/S and P/B Berkshire Hathaway is the clear value. Apples figures are 3 times that of BRK therefore from this perspective any value seems limited.

Given the data, at this point I might be inclined to modify my position and not let my ego dominate the facts. I would suggest that Berkshire Hathaway is the better investment because it is far less volatile, diversified, and does not have to worry as much about competition, R&D and constantly having to invent things. That said, Apple has proven to be very inventive and seems to have plenty of ammunition going forward for at least the next year or two. In that time frame we might just see a similar outcome. They may end up in the same place with BRK.B doing it with far less dazzling spectacle.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture and planning firm. He writes the columns Chasing Value™ and Serious Money. Disclosure: He owns shares and options of BRK.B