What would I do with a spare $461,705? One attractive option might be buying one Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) class ‘A’ share. This is the original Berkshire stock, which has been publicly traded since 1965 without ever undergoing a stock split.
Unfortunately, I don’t have that kind of money. But, thankfully the class ‘B’ shares in Warren Buffett‘s holding company trade for a more affordable $304.02 each. Introduced in 1996, these Berkshire Hathaway shares allow smaller investors to gain exposure to Buffett’s portfolio.
So, how would my investment have performed if I’d invested $1,000 in the company’s class ‘B’ shares shortly after they were first issued? Let’s explore.
25-year return
Back in 1998, Berkshire stock was trading for $37.38. At that price, buying 27 shares would have cost me a little over $1,000 — to be exact, $1,009.26.
Accounting for the stock split that occurred in 2010, my initial investment would have ballooned to $8,208.54 today. That’s a whopping 713% increase, which beats the compound annual growth rate of the S&P 500 over the same period — even with dividends reinvested.
Given the underperformance of sterling against the dollar over that timeframe, my returns would be even greater when measured in GBP.
Unlike many large companies, Berkshire doesn’t pay dividends. Instead, Buffett prefers to add shareholder value via new investments or share buybacks. In his most recent annual letter, the Oracle of Omaha had strong words for buyback critics, branding them as “either an economic illiterate or a silver-tongued demagogue“.
Value investing
So, it’s clear Berkshire Hathaway shares would have been an excellent investment for the past two and a half decades. But, what does the company invest in today?
| Stock | Percentage of the Berkshire portfolio |
|---|---|
| Apple | 41% |
| Bank of America | 10.8% |
| Chevron | 8.3% |
| American Express | 8.1% |
| Coca-Cola | 7.3% |
A glance at Berkshire’s top positions shows Buffett’s conviction in his favourite stock picks. The top five companies in the portfolio make up over 75% of its value.
In addition, the company’s cash hoard has swelled to $128.65bn. As the stock market looks likely to endure further turbulence in 2023, Buffett’s cash position serves as a useful reminder that cash really is king in the event of potential financial panics.
Should I buy Berkshire Hathaway shares?
I already own Berkshire shares in my portfolio. I’m comfortable with my position and will continue to hold the shares I own.
One big risk facing the company is the fact that its reputation as an investment to beat the market is inextricably linked to the unique abilities of its chairman. Buffett is 92 years old, and vice chairman Charlie Munger is even older at 99.
Berkshire’s future without Buffett and Munger at the helm is untested. However, Buffett has assured investors that the company is “100% prepared for [their] departure”, praising a management culture “that is rare among giant corporations”.
I trust Buffett’s judgement. That extends to his succession plans for his company and the team the billionaire has assembled over his years in charge. Accordingly, Berkshire Hathaway shares will continue to represent an important part of my portfolio for many years to come.
