Warren Buffett says he has never recommended Berkshire Hathaway’s shares. He hasn’t done so in writing. He hasn’t done so on television. He even says he hasn’t done so privately. Yet, as the company’s chairman since 1965, he might have created more millionaires than anyone…ever.

For decades, Berkshire Hathaway’s stock has trounced the S&P 500. From 1965-2018 the S&P 500 averaged a compound annual return of 9.7 percent. In contrast, shares of Berkshire Hathaway averaged a compound annual return of 20.5 percent.

If you had invested $100 in Berkshire Hathaway stock in 1965, it would have grown to almost $2 million by July 31, 2019. That’s mind-boggling. Yet, Buffett’s letter to shareholders oozes humility every year. He always credits others for the company’s success, and he highlights his mistakes.

But has Berkshire’s success now run its course?

For years, Buffett has been saying that it’s going to get tougher to beat the S&P 500. He blames Berkshire’s growing size. He even instructed that his retirement savings should be invested in a portfolio of low-cost index funds if he dies before his wife. The Financial Times recently asked Warren Buffett if Berkshire Hathaway is a better investment than the S&P 500. He replied, “I think the financial result would be very close to the same.”

But recently, that hasn’t been the case. The S&P 500 beat Berkshire Hathaway over the past 1, 3, 5, 10 and 15-year periods, ending July 31, 2019.

The S&P 500 Runs Away From Berkshire Hathaway

1 Year 3 Years 5 years 10 Years 15 Years
Berkshire Hathaway 2.36% 12.64% 10.41% 12.27% 8.79%
S&P 500 Index 9.56% 13.62% 10.98% 14.0% 9.05%

But Berkshire’s shares might have plenty of room to run. That’s because its price has rarely been this cheap, compared to the average stock. Over the past 30 years, Berkshire Hathaway’s shares have averaged a price that’s about 1.58 times the company’s book value. On August 1, 2019, it traded at 1.35 times book value.

Most people value a company based on its trailing price-to-earnings (PE) ratio. It’s calculated by dividing a business’ total market value by the previous year’s income. According to multpl.com, the trailing PE ratio for the average stock in the S&P 500 was 22 times earnings on August 1, 2019. According to Morningstar, Berkshire Hathaway’s trailing PE ratio was 19.18 times earnings.

At first glance, that makes Berkshire Hathaway about 12 percent cheaper than the S&P 500. But if you offered Buffett a can of Cherry Coke, he might say Berkshire Hathaway shares are even cheaper than they look.

Recall that price-to-earnings ratios are calculated by dividing the company’s market value by its business earnings. For most companies, this is a simple calculation. If a company’s market value were $100 million, and if that company earned $5 million last year, its PE ratio would be 20 times earnings (100 million divided by 5 million = 20).

But Berkshire Hathaway is different. It receives income from three main sources: its core insurance business, its wholly owned private businesses and the dividend income it receives from the stocks it owns. Berkshire Hathaway has a huge portfolio of individual stocks. That differs from most publically traded companies. For example, Berkshire Hathaway owns 17.9 percent of American Express. It owns 5.4 percent of Apple, 9.5 percent of Bank of America, 9.4 percent of Coca Cola and 9.8 percent of Wells Fargo.

As a result, Berkshire receives huge dividends from these companies. For example, according to Berkshire Hathaway’s annual report,Apple paid Berkshire Hathaway $745 million in dividends last year. That money was added to Berkshire Hathaway’s official income in 2018. In other words, that income was part of the PE ratio equation. But in Warren Buffett’s annual shareholder letters, he educates investors on what he calls, intrinsic value. Here’s what that means. Companies like Apple don’t pay all of their profits to shareholders, in the form of dividends. Apple retains most of the company’s profits to grow its business.

According to Valueline, Apple only paid 26 percent of its 2018 net profit in dividends. That means Apple retained 74 percent of its net earnings. Because Berkshire Hathaway owns 5.4 percent of Apple, Berkshire indirectly owns 5.4 percent of those retained earnings. In Buffett-speak, this increases Berkshire Hathaway’s intrinsic value. But Berkshire Hathaway doesn’t report such profits, so it doesn’t get calculated into the company’s price-to-earnings (PE) ratio. Historically, however, such retained earnings have boosted Berkshire Hathaway’s market price.

Most of the publically traded companies that Berkshire Hathaway owns retain the bulk of their earnings—instead of paying them out in dividends. According to Berkshire Hathaway’s 2018 shareholder letter, the company earned dividend payments of almost $2.97 billion last year from just its five largest stock holdings. But Berkshire’s share of those companies’ retained earnings was $6.837 billion.

So here’s what we know:

As of this writing, the average stock in the S&P 500 had a PE ratio of 22 times earnings.

Berkshire Hathaway’s PE ratio was 19.18 times earnings. But if we include the retained earnings from the stocks that Berkshire owns, it was far less than that. That’s why Buffett’s stock might be a bargain now.

I’m not saying you should buy Berkshire Hathaway stock. Instead, I recommend a diversified portfolio of low-cost index funds. But if somebody forced me, at gunpoint, to put 100 percent of my net worth into just one company, I wouldn’t hesitate to pick Berkshire Hathaway shares. After all, it owns dozens of private and publically traded companies, so it’s more diversified than a Dow Jones Industrials ETF. Best of all, it’s currently cheaper than the average U.S. stock.

Andrew Hallam is a Digital Nomad. He’s the author of the bestseller Millionaire Expat: How To Build Wealth Living Overseas