The last five years have been a fantastic period to follow billionaire investor Warren Buffett. His investment firm, Berkshire Hathaway, has seen its market-cap almost triple by 170% since June 2020. And for every £1,000, investors now have close to £2,730.
Considering Buffett’s tremendous track record of finding winning investment opportunities, such performance isn’t a major surprise. But despite his success, several FTSE leaders have actually performed even better.
Even before counting extra gains from dividends, stocks like Babcock International (up 206%), Centrica (LSE:CNA) (up 288%), and BAE Systems (up 277%) have all beaten Buffett’s returns. The question now is, can they continue?
How did Centrica beat Buffett?
Sadly, past performance has little predictive power over future returns. That’s because a stock price can be boosted for a variety of reasons, and not all of them are sustainable. For investors, that means even the best-looking businesses in the world still need careful analysis and consideration.
With that in mind, let’s zoom in on the biggest winner of this group, the multi-utilities specialist Centrica. The company’s upward trajectory is actually a pretty new phenomenon. Since between 2013 and 2020, its shares were firmly on a downward trajectory, falling by a whopping 90%!
The rebound was kicked off with a bit of luck. Following the tragic outbreak of the war in Ukraine, wholesale energy prices surged. Since Centrica operates with a lot of fixed costs, higher prices translate into higher profit margins. And underlying earnings more than tripled from £1,047m to £3,508m. Elevated prices persisted into 2023, providing two consecutive years of jaw-dropping free cash flow generation.
Management seized the opportunity and used its overflowing coffers to reorganise the business, shore up the balance sheet, and take back market share from smaller rivals. And today, it’s a far leaner enterprise that continues to generate strong free cash flow, even as energy prices steadily normalise.
What’s on the horizon
Explosive earnings growth paired with smart execution is a long-proven recipe for success. So a near-300% surge in Centrica’s share price makes a lot of sense, in my eyes. The question now is, can Centrica continue to be a Buffett-beating stock?
Management continues to invest in energy transition projects like natural gas storage, nuclear power, smart meters, and hydrogen infrastructure. And with investments made into improving customer service quality, the number of complaints has dropped significantly from 2,748 per 100,000 accounts at the start of 2023 to 1,168 in the first quarter of 2025.
Assuming these projects pay off and Centrica continues to build rapport and loyalty, institutional analysts have projected the Centrica share price could climb by as much as another 30% in the next 12 months. By comparison, Buffett’s track record shows an average annual return just shy of 20%.
However, not everyone’s convinced. Despite the remarkable progress made, Centrica still has its weak spots. The business is still at the mercy of regulatory price caps. And in the long run, the group’s multi-billion pound investments into hydrogen and small modular nuclear reactor projects, among others, aren’t guaranteed to pay off.
After all, these are largely unproven technologies exposed to adoption risk.
All things considered, Centrica remains an interesting story despite the risks. Therefore, investors may want to consider diving deeper to investigate its long-term potential.
