Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) ‘A’ shares were worth around $152,000 in December 2012, today they’re worth $468,000. This is a huge jump in just 10 years. The company’s ‘A’ shares are among the most expensive in the world.
It’s worth noting that if I wanted to buy the firm’s shares a decade ago, I wouldn’t have been able to afford the ‘A’ shares with just $1,000. Instead I would have had to buy the ‘B’ shares. Class B shares, first issued in 1996, are more modestly priced and have a correspondingly modest share of equity value in the company. Class B is valued at just over $300. And a decade ago, Class B shares were trading for around $90.
So if I had invested in Berkshire Hathaway stock 10 years ago, today my $1,000 investment would be worth $3,000. That’s clearly a very attractive return. In fact, because the pound is weaker now than it was 10 years ago, my investment would be worth even more in GBP terms.
Index-beating performance
Warren Buffett‘s Berkshire Hathaway has outperformed the S&P 500, but only just. In December, 10 years ago, the index closed around 1,450. Today, the S&P 500 is bobbing around 4,000, meaning the index is nearly three times larger today than it was just a decade ago.
In other terms, the S&P 500 had annualised returns of 10.95% over the past decade, while Berkshire Hathaway had an annualised return of 11.39%.
What does Berkshire Hathaway do?
Buffett has amassed $108bn from investing, while giving away $49bn on the way. So, clearly, it’s been a successful business for the so-called ‘Oracle of Omaha’.
Berkshire Hathaway is a holding company for a multitude of businesses and it’s now one of the largest companies in the world, based on market capitalisation.
The firm has existed since 1839, but has only achieved notoriety over the last 40 years, or so. Since 1965, the firm has been run by its chairman and CEO Buffett. Nowadays, Berkshire Hathaway has a market capitalisation close to $700bn!
Am I too late to invest?
After a decade of impressive gains, am I too late to invest? So, as noted before, I can buy shares in Berkshire Hathaway for $300. So I don’t need half a million.
The company’s success is largely attributed to Buffett’s value investing strategy. The legendary investor seeks a margin of safety when investing, meaning the intrinsic value is substantially higher than the market value of the stock he’s looking to buy.
He also sticks to what he knows, something which allows him to accurately assess the company’s future performance and the industry in which it operates. This is reflected by the firm’s relatively small number of holdings — 53, in fact.
However, it’s worth noting that Buffett and vice-chairman Charlie Munger are both in their nineties. They’re unlikely to be running the company for many more decades.
But they’ve been succession-planning for years, and the firm is unlikely to deviate from its strategy that has made it one of the largest companies in the world.
There’s only one thing stopping me buying Berkshire Hathaway shares, and that’s the strength of the dollar. If the pound appreciates, I’ll reconsider.
