Late to the U.S. rally? Warren Buffett can help

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Here's a thought if you're late to the mega rally in U.S. stocks: Get Warren Buffett's help. It's easy – just buy some shares of his holding company, Berkshire Hathaway. Berkshire's underlying business and investments represent the best thinking of Buffett and his team of managers.

Let's be clear about something – Berkshire is no bargain right now. It has participated fully in the recent U.S. market rally, notching a gain of almost 20 per cent for the year to March 10 that compares to 21 per cent for the S&P 500. And yet, Berkshire could offer an opportunity for a latecomer to the U.S. rally that is worried about the risk of a downturn.

In a recent report, the investment firm Odlum Brown profiled Berkshire as a company with a low-risk profile as a result of its cash reserves and other assets. Odlum uses a "sum-of-the-parts" approach to valuing Berkshire, which owns stocks and other securities worth about $87 (U.S.) per B share. Close to 40 per cent of this portfolio is in cash and bonds, which means a low return potential but also a cushion in a down market and a ready pot of money to take advantage of any buying opportunities that emerge. There are also operating businesses in the Berkshire fold – combine the earnings potential here with investment portfolio and you get a price target from Odlum of roughly $140 (U.S.) per share, which compares to a mid-March level of $125.

Insurance is Berkshire's core business, but it also owns a railroad and an energy utility. The company's stock holdings include Coca-Cola, IBM, Wells Fargo and American Express. "(Berkshire) has outperformed almost all stocks and mutual funds that have existed for at least 30 years by buying cheap, safe, quality stocks and private businesses and boosting its underlying returns by using low cost and stable sources of financing (debt and insurance float)," the Odlum report says.

Berkshire doesn't pay a dividend, so it's strictly for growth investors. It's also not really suitable as a core U.S. holding because it's not exposed to all facets of the U.S. economy. Consider pairing it up with a U.S. total market ETF like the Vanguard Total Stock Market ETF, which has a high weighting in technology. That's not a strong suit in the Berkshire lineup.

There will be some overlap if you use an ETF with lots of U.S. large cap exposure. Procter & Game is a major holding in Berkshire and VTI, for example. Berkshire itself is the ETF's 13th largest holding.