Berkshire Hathaway (BRK.B) is in its class in itself when it comes to very long-term outperformance. Warren Buffett, who will retire as CEO at the end of 2025, is nothing known as the biggest long-term investor ever.
Brk.B’s stock has also been a market beater for the past 20 years, but all billionaires were creating skin in the game long before the turn of the century. That’s how complex things and many laws work.
But first, a brief summary of Berkshire Hathaway’s history. The company was a textile company that was struggling when Buffett took control in 1965. Over the next few years, Buffett transformed it into a holding company, or a company that bought other companies.
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Buffett’s initial target was insurance companies, and the insurance business remains at the heart of today’s business.
The insurance business was particularly appealing to Buffett because of the float. Or the insurance company held between collecting premiums and paying the claim. Thanks to the Berkshire insurance company float, Buffett had enough capital sources to buy or invest in other companies.
Today, Berkshire Hathaway is made up of over 60 wholly owned subsidiaries, including BNSF Railway, GEICO Insurance, Industrial Titan Precision Cast Part, and the Queen of Fast Food Chain Dairy Products.
With a market value of around $250 billion, the Berkshire Hathaway equity portfolio includes major stocks in Apple (AAPL), Bank of America (BAC) and American Express (AXP), to name just a few.
Berkshire Hathaway has always been a long-term bet on the dynamism of the US economy. It is also a low beta strain. In other words, performance tends to decline in the up market and performance tends to occur in the down market.
And it’s only surprising that it’s been added over the past 60 years. Since 1965, Berkshire stocks have generated a combined annual growth rate of almost 20% vs. 10% on the S&P 500.
What does that look like in the securities statement? Well, if you put $1,000 in Berkshire stocks 60 years ago, it’s worth about $33 million today. The same amount invested in the S&P 500 is worth around $336,000 today.
Warren Buffett and his late partner Charlie Munger have really minted many billionaires over their long career.
However, BRK.B’s returns over the past 20 years have been excellent, but naturally modest.
After all, there’s nothing like going into the first floor.
The bottom line of brk.b stock?
BRK.B stocks have significantly outperformed the broader market over the past five years, but in reality they have slowed the S&P 500’s returns over the past 1, 3, 10 and 15 years period.
If it went back 20 years ago, Brk.B, who did not pay dividends, generated an annual revenue of 11.2%.
It wasn’t too tattered, leading the S&P 500, with dividends reinvested at almost percentage points. Active fund managers will be excited by such outperformance, but it rarely means that BRK.B’s stock was the path to wealth in the 21st century.
Take a look at the chart above to understand what BRK.B’s returns mean in your securities statement over the past decades. They are good, but not great.
Certainly, if you put $1,000 in Berkshire stocks 20 years ago, it’s worth about $8,500 today. The same amount invested in the S&P 500 is theoretically worth around $7,600 today.
With Warren Buffett set to resign at the end of 2025, some fear that Berkshire’s best days will be behind it. The reality is that Berkshire is so big now it’s unreasonable to expect everyone to repeat Buffett’s historic run.
Certainly, that doesn’t mean that Brk.B will not be able to continue being a market beater in the future. According to data from S&P Global Market Intelligence, Wall Street is almost bullish in its name, giving it a consensus recommendation for purchasing.
Nevertheless, the Brk.B era of producing truly prominent returns appears to be behind it.
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1,000 dollar investment Warren Buffett
