Berkshire Hathaway is the storied conglomerate run by legendary investor Warren Buffett.
Few companies are more famous or have beaten the broader market more consistently than Berkshire Hathaway (BRK.A -0.44%) (BRK.B -0.35%), the large conglomerate that has been run by legendary investor Warren Buffett for decades.
Between 1965 and 2021, Berkshire's market value has risen 3,641,613%. Put another way, it's a compound annual gain of roughly 20.1%. During the same period, the S&P 500 has gained 30,209% including dividends, for an annual gain of 10.5%.
But a lot has happened during that time, so let's see what investors would have made if they invested $5,000 in Berkshire in the year 2000. I'll focus on its Class B shares because they are more affordable for the average retail investor.
A long history of excellence
Berkshire Hathaway operates many different businesses in sectors including railroads, mortgage lending, energy, and insurance. It also manages a roughly $313.6 billion stock portfolio.
Berkshire Class A shares are incredibly expensive, with one share currently costing around $406,000. To make shares more accessible to the retail investor, Berkshire created Class B shares in 1996. They were issued at 1/30 the price of Class A shares, which at the time traded for around $32,000, meaning Class B shares started trading at more than $1,000.
Warren Buffett. Image source: Motley Fool.
By late 2007, Class B shares had risen all the way to roughly $4,736, giving investors more than a 340% gain in about 11 years. But the stock then dipped during the Great Recession and in late 2019 traded for around $3,350. In January 2010, Berkshire would perform a 50-for-1 stock split to make the shares even more attainable for smaller investors, dropping the price to $73.
A slate of big moves
Since the turn of the century, Berkshire has certainly been active. The conglomerate has made a number of big acquisitions, including the purchase of the battery giant Duracell and the acquisition of several large energy companies. In 2009, Berkshire made its largest-ever acquisition when it acquired a controlling stake in the Burlington Northern Santa Fe (BNSF) Railway for $34 billion (the company also had a lot of debt).
Berkshire has been busy this year as well, plowing more than $57 billion into equities in the first half of the year. It has purchased a massive amount of shares in the large U.S. oil producer Occidental Petroleum, which has seen its stock soar since the U.S. and other countries imposed sanctions on Russian oil. The conglomerate now owns well over 20% of the company, and there are rumors it might look to acquire Occidental outright.
Buffett and Berkshire have also made mistakes over the past two decades, most notably purchasing Kraft Heinz for $28 billion in 2013. The stock is down significantly since then.
But there have also been many successful investments including shares in Bank of America purchased right after the Great Recession in 2011. Since then, Berkshire has built that position into the second-largest holding in its equities portfolio, currently accounting for more than 10%. And then there was Berkshire's memorable first purchase of Apple shares in 2016. The company is now Berkshire's largest holding by far, making up more than 41% of its portfolio.
If you invested $5,000 in 2000, how much would you have now?
In January of 2000, shares of Berkshire Class B traded at about $1,646. Right before the stock split in 2010, they traded for roughly $3,353, which means at that point, you were up about 104% and had turned your $5,000 into $10,200.
Then following the stock split, shares traded for about $73 and currently trade for more than $269, which is a gain of about 268%. You have now turned your $10,200 into roughly $27,336. From your initial $5,000 investment in 2000, you have realized a total gain of about 446% in 22 years.
This equates to a compound annual growth rate (CAGR) of 8.03%, which would beat the S&P 500's CAGR of 6.44% since 2000. So, yes, Berkshire shares continue to beat the market but not nearly by as much as they have since 1965.
Bank of America is an advertising partner of The Ascent, a Motley Fool company. Bram Berkowitz has positions in Bank of America. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway (B shares). The Motley Fool recommends The Kraft Heinz Company and recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
