Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) ‘A’ shares were worth around $750 in December 1982. Today, an investor would have to hand over a staggering $472,000 for one. Every $100 invested in the stock back then is worth almost $63,000 today.
What is Berkshire Hathaway? It’s the investment company run by one of the top financial wizards of the past century, Warren Buffett.
Since he took charge in 1965, the company has provided a total return of 3,641,613%. At least, that’s up to 2021. Over the same period, the US benchmark S&P 500 index returned 30,209%, including dividends.
Trouncing the index
That’s the equivalent of 10.5% per year from the S&P, and 20.1% from Berkshire Hathaway. Not only did Buffett and his team beat the index over the long term, which few investment managers can achieve, they almost doubled it.
It’ll be interesting reading Buffett’s 2022 letter to shareholders, after the year we’ve had. However Berkshire Hathaway stock performs, it’s essential reading for me. It provides an insight into how the great man and his long-term investing partner Charlie Munger are thinking. And over the years, it’s provided some gems of investing wisdom.
Fear and greed
One of the most famous is from 1986: “What we do know, however, is that occasional outbreaks of those two super-contagious diseases, fear and greed, will forever occur in the investment community. The timing of these epidemics will be unpredictable. And the market aberrations produced by them will be equally unpredictable, both as to duration and degree. Therefore, we never try to anticipate the arrival or departure of either disease. Our goal is more modest: we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
People remember that last sentence, but the whole thing is really about not trying to time the market.
Raining gold
Another favourite comes from 2016: “Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons.“
Doesn’t that describe things right now? Economic horror, recession, soaring interest rates… and lots of cheap shares as panicking investors flee the stock market.
Buy now?
What does any of this say about buying Berkshire Hathaway shares today? Firstly, we don’t need nearly half a million to get in. The firm also has ‘B shares, at around $300 apiece.
One obvious issue is that Buffett and Munger are both in their nineties. They’re unlikely to be running the company for another 40 years.
But they’ve been preparing for succession for decades, and have recruited some of the best in the business — who have been doing much of the work for some time now.
Better off
I can’t say whether Berkshire Hathaway will be a top investment for the next four decades. But I can say that, had I trusted all my cash to it over my investing career, I’d be a lot wealthier today than I am after decades of picking my own shares.
