Few companies are better known or have beaten the broader market more consistently thanBerkshire Hathaway (BRK.A0,77 %)(BRK.B0,86 %), the large conglomerate led for decades by legendary investor Warren Buffett.
Between 1965 and 2021, Berkshire's market cap increased by 3,641,613%. Put another way, that's a compound annual gain of about 20.1%. In the same period,S&P500has gained 30,209% including dividends, for an annual gain of 10.5%.
But a lot has happened in that time, so let's take a look at what investors would have made if they had invested $5,000 in Berkshire in the year 2000. I will focus on the 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 industries such as railroads, mortgages, energy and insurance. It also manages an equity portfolio of approximately $313.6 billion.
Berkshire Class A shares are incredibly expensive: one share currently costs about $406,000. To make stocks more accessible to private investors, Berkshire created Class B shares in 1996. These were issued at 1/30 the price of Class A shares, which were trading at around $32,000 at the time, meaning Class B shares were trading at more than $32,000. than $1,000.
Warren Buffett. Image source: Motley Fool.
By the end of 2007, Class B shares had risen to about $4,736, giving investors a gain of more than 340% in about 11 years. But the stock then fell during the Great Recession, trading around $3,350 at the end of 2019. In January 2010, Berkshire would conduct a 50-for-1 stock split to make the stock even more accessible to smaller investors, lowering the price to $73.
A board with great features
Berkshire has certainly been active since the turn of the century. The conglomerate has made a number of major acquisitions, including the purchase of battery giant Duracell and the acquisition of several major energy companies. In 2009, Berkshire made its largest acquisition ever when it acquired a controlling stake in Burlington Northern Santa Fe (BNSF) Railway for $34 billion (the company also had a lot of debt).
Berkshire has also been busy this year and invested more than $57 billion in shares in the first half of the year. It has bought a huge amount of shares in the major US oil producerWestern petroleum, whose shares have risen since the United States and other countries imposed sanctions on Russian oil. The conglomerate now owns just over 20% of the company, and is rumored to be looking to acquire Occidental outright.
Buffettand Berkshire has also made mistakes over the past two decades, especially in acquisitionsKraft Heinzfor $28 billion in 2013. The stock has fallen significantly since then.
But there have also been many successful investments, including shares inBank of Americapurchased just after the Great Recession of 2011. Since then, Berkshire has built this position into the second-largest position in its stock portfolio, currently accounting for more than 10%. And then there was the momentous first purchase of BerkshireAppelshares in 2016. The company is now Berkshire's ltoughest teammore than 41% of its portfolio.
If you invested $5,000 in 2000, how much would you have now?
In January 2000, Berkshire Class B shares traded at about $1,646. Just before the stock split in 2010, they were trading around $3,353, meaning at that point you were up about 104% and turned your $5,000 into $10,200.
After the stock split, the shares traded for about $73 and are currently trading for over $269, a gain of about 268%. You have now turned your $10,200 into approximately $27,336. From your initial investment of $5,000 in 2000, you have achieved a total return of approximately 446% in 22 years.
This equates to a compound annual growth rate (CAGR) of 8.03%, which would be betterS&P500's CAGR of 6.44% since 2000. So yes, Berkshire stock continues to beat the market, but not nearly as much as it has since 1965.
Bank of America is an advertising partner of The Ascent, a Motley Fool company. Bram Berkowitz holds positions at Bank of America. The Motley Fool holds 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 onedisclosure policy.
