Key Points
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The company is built on its culture and investment philosophy.
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In addition to its stock portfolio, Berkshire owns some 70 private companies.
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Berkshire Hathaway, as everyone knows, is the company that Warren Buffett built and ran for 60 years until he stepped down as CEO at the end of last year and as chairman in September, handing over the reins to new CEO Greg Abel.
The insurance-based conglomerate has grown and flourished during Buffett’s stewardship with a market cap of $1.23 trillion, making it the 13th-most valuable company in the world. Since 1965, when Buffett took control of the company, Berkshire Hathaway stock has had an average annual return of 19.7%, nearly twice the 10.5% average return for the S&P 500 over the same period.
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It has undoubtedly been one of the best, most reliable stocks for investors over the past six decades, not only for its high returns but also for its steadiness and stability. Over those 60 years, Berkshire Hathaway stock beat the S&P 500 in 40 of them and had negative returns in only 11 of them.
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While its performance is clear, what you actually get when you buy Berkshire Hathaway stock is not as clear to many investors. It doesn’t really make anything, like Apple (NASDAQ:AAPL), Nvidia (NASDAQ:NVDA), or Procter & Gamble (NYSE:PG), and it doesn’t really sell anything, at least directly.
It is a conglomerate that owns a lot of companies that do provide products and services. Specifically, it owns some 70 companies, including a railroad, many insurance companies, some construction and industrial firms, and consumer brands like Benjamin Moore, Dairy Queen, and Duracell, to name a few.
Often, that’s forgotten because so much media and investor attention is on its $335 billion portfolio of stocks. But what has really sustained Berkshire Hathaway over the years is all the companies it does own and the earnings they generate.
Here’s what you get when you buy Berkshire Hathaway stock.
In Warren we trust
For many years, as the Oracle of Omaha’s reputation as an investor grew, many people invested in Berkshire Hathaway mainly because of their faith in Buffett — in Warren we trust.
Buffett has now stepped down as both CEO and chairman, and Abel runs the show, so some may wonder whether things will change. But Abel has learned at Buffett’s side for some 26 years, and the culture that Buffett built remains.
In his first letter to shareholders back in February, Abel wrote:
Our culture begins with a partnership attitude. Our shareholders are our partners whose trust we have earned and must work to keep. Their interests are at the center of our decision-making. This attitude goes well beyond Berkshire’s corporate office in Omaha. It extends across our operating businesses, where employees embrace an ownership mindset, managing our shareholders’ assets as if they were their own. We think in decades, act with discipline, and uphold our commitments. Stewardship is embedded in how we operate, reinforcing that our culture is a system for generating long-term performance, not just a set of beliefs.
So it starts with the culture, but when you buy Berkshire stock, you’re also buying an investment philosophy — one that applies to the stocks it invests in and the 70 or so companies it owns stakes in.
That investment philosophy focuses on value investing with a long-term horizon, and companies trading below their intrinsic value, with strong management, moats, and solid fundamentals.
So those principles shape every stock in Berkshire’s portfolio, and that culture runs through every company it owns. That approach has compounded at 19.7% a year since 1965.
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Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, and Nvidia. The Motley Fool has a disclosure policy.
