Warren Buffett-led Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) achieved a new milestone in August, surpassing $1 trillion in market cap for the first time.
Although Berkshire is known for its public equity investments in companies like Apple and Coca-Cola, the value of the rest of the business is actually much higher. In fact, Berkshire’s holdings in public companies are worth about $320 billion compared to the $1.026 trillion market cap for Berkshire as a whole.
Berkshire has a treasure trove of property and casualty insurance segments, ownership of BNSF Railway, 92% ownership of Berkshire Hathaway Energy, manufacturing, service, and retailing businesses, and more. It also has a combined $79.41 billion invested in Bank of America (NYSE: BAC), American Express (NYSE: AXP), Visa (NYSE: V), and Mastercard (NYSE: MA).
While you could buy Berkshire Hathaway stock to get exposure to these top companies and Berkshire’s private holdings, a simpler and perhaps more effective way of investing in the financial sector is through an exchange-traded fund (ETF) like the Vanguard Financials ETF (NYSEMKT: VFH). In fact, Berkshire Hathaway stock is the fund’s second-largest holding with an 8.1% weighting.
Here’s why financials are one of the market’s most diversified and value-orientated sectors and why the Vanguard Financials ETF could be worth buying now.
Image source: Getty Images.
Getting to know the financial sector
The financial sector is the second most valuable sector behind technology — making up 13.3% of the S&P 500. It includes a diverse array of industries, from big banks to regional banks, investment banking, insurance providers, payment processors, financial exchanges, and more.
Although the financial sector generally benefits from economic growth, not every part of it reacts to economic factors in the same way. For example, banks can benefit from higher interest rates by collecting more interest income from consumers. But credit card companies make money by the number of transactions and the average amount of each transaction. So, they would prefer lower interest…
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