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4 Stocks Buffett Might Buy--If He Could

Karen Wallace, CFP®

There are many contexts in which  Berkshire Hathaway's (BRK.B) $480 billion market cap is a positive. Berkshire's reinsurance businesses General Re and BHRG are good examples. As Buffett points out in his February letter to shareholders:

"No company comes close to Berkshire in being financially prepared for a $400 billion [mega catastophe]. Our share of such a loss might be $12 billion or so, an amount far below the annual earnings we expect from our non-insurance activities. Concurrently, much--indeed, perhaps most--of the [property/casualty] world would be out of business."

Buffett estimates insured losses from 2017's three hurricanes that hit Texas, Florida, and Puerto Rico are around $100 billion, and Berkshire's share around $2 billion after taxes. But, he says, the net cost from the three hurricanes reduced Berkshire's GAAP net worth by less than 1%. Elsewhere in the reinsurance industry there were many companies that suffered losses in net worth ranging from 7% to more than 15%, he said. 

Karen Wallace, CFP® does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.