After making billions from investing in the stock market, Warren Buffett’s probably the most famous investor of all time. But the ‘Oracle of Omaha’ has left his position as chief executive of Berkshire Hathaway (NYSE:BRK.A). Hopefully, he will continue to deliver some of his clever insights and pithy quotes, a bit like the valuable advice he gave in his 1985 letter to shareholders.
What did he write?
After discussing a textile business that the group had owned, and explaining that for six years he had unsuccessfully tried to prove that it would deliver a modest cash return, Buffett wrote: “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.”
Although he was discussing Berkshire’s majority position in an operating business, I think the same advice applies to investing in the stock market. If it’s clear that a company’s not going anywhere, it’s best to sell up, even if you’re sitting on a loss.
Personally, I think investors should take a long-term view. But there’s a big difference between a stock price falling as a result of the ‘normal’ economic cycle and one that’s going down due to the underlying business being fundamentally broken.
Another excellent quote points to the benefits of passive income, and earning dividends from doing very little. The American billionaire once observed: “If you don’t find a way to make money while you sleep, you will work until you die.”
Ironically, since Buffett took over in 1965, Berkshire Hathaway has only paid one dividend, in 1967. The group’s boss would rather use surplus cash to repurchase the group’s stock. He also recently wrote: “I can’t remember why I suggested this action to Berkshire’s board of directors. Now it seems like a bad dream.”
Very different
In many respects, Berkshire Hathaway is an unusual investment vehicle. It owns all of the stock of many operating businesses in the textile, insurance, and energy sectors. In 2024, these generated $47.4bn of operating earnings compared to the group’s $52.8bn of investment gains from minority positions in quoted companies.
The group’s also unconventional in that it’s sitting on a huge amount of cash and US Treasury bills — $377bn at 30 September 2025. This is $94bn more than the value of its stocks.
Good and bad
But Buffett isn’t perfect. He admits he’s made many mistakes. In 20 years out of the six decades from 1964-2024, the group’s shares underperformed those of the S&P 500.
However, over this period, Berkshire Hathaway’s share price has risen by an astonishing 5,502,284% compared to 39,054% for the index as a whole. Remember what I said about long-term investing?
As the American retires, an obvious concern is whether the company will continue to deliver exceptional returns in a post-Buffett era. Also, its apparent lack of interest in the tech sector – for example, it’s recently been reducing its stake in Apple — could prove to be a mistake.
However, I still think the group’s shares are worth considering, although I suspect its Class A stock’s beyond the reach of most investors. Each share currently (18 January) costs over $738,000! Fortunately, its B shares are changing hands for a more affordable $492, although they don’t carry the same voting rights.
