Ready to dive into the world of investing with one of the most successful companies in history? Excellent! Let's explore the remarkable journey and performance of Berkshire Hathaway, the conglomerate built by the legendary Warren Buffett and his late partner, Charlie Munger.
Step 1: The Historical Context: A Tale of Two Companies
To truly appreciate Berkshire Hathaway's performance, we need to go back to its roots. Imagine a struggling textile company in the mid-20th century, a business in a declining industry. That was the original Berkshire Hathaway. Now, consider a young, brilliant investor named Warren Buffett who, along with Charlie Munger, saw an opportunity not in the textile business itself, but in the value of the company's assets.
So, let's start with a question for you: If you were a young investor in the 1960s, would you have dared to invest in a failing textile mill, even if you saw potential in its underlying value? Think about that as we unpack the numbers.
This is the foundation of the story: Buffett's decision to take control of Berkshire Hathaway in 1965 was not about turning a textile company around, but about using its cash flow to acquire and invest in great businesses. This shift is the single most important factor in understanding its performance.
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| How Has Berkshire Hathaway Performed |
Step 2: Unpacking the Legendary Performance
The numbers speak for themselves. Berkshire Hathaway's performance over the past six decades is nothing short of extraordinary. When you look at the returns, it's a testament to the power of disciplined, long-term investing.
A. The Compounded Annual Growth Rate (CAGR)
Let's talk numbers. Since Buffett took control in 1965, Berkshire Hathaway has achieved a compounded annual growth rate of 19.8% to 19.9% (depending on the period), while the S&P 500, including dividends, has returned around 10.2% to 10.4%.
What does this mean in practical terms? It means that for every year over the past 60 years, on average, Berkshire Hathaway's value has grown at nearly double the rate of the broader U.S. stock market.
B. The Mind-Boggling Total Return
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The difference in total return is even more striking.
From 1965 to 2024, Berkshire Hathaway's total shareholder return was a staggering 5,502,284%.
In contrast, the S&P 500's total return during the same period was approximately 39,054%.
Just imagine the compounding effect of that difference! A $10,000 investment in Berkshire Hathaway in 1965 would have been worth an estimated $550 million by 2024. A similar investment in the S&P 500 would have been substantial, but nowhere near that level of wealth creation.
Step 3: The Driving Forces Behind the Performance
How did a struggling textile company morph into a trillion-dollar powerhouse? The answer lies in the unique and time-tested investment philosophy of Warren Buffett and Charlie Munger.
A. The "Business-First" Approach
Buffett and Munger were not "stock pickers" in the traditional sense; they were "business pickers." They viewed stocks as ownership stakes in real businesses. This qualitative understanding of a business was prioritized over complex financial modeling. They focused on:
Economic Moats: Companies with sustainable competitive advantages, such as strong brands, network effects, or regulatory barriers, that protect them from competitors.
Quality Management: Leaders with integrity, intelligence, and energy who act as fiduciaries for shareholders.
Simplicity: Investing in businesses they could easily understand, avoiding fads and complex industries.
Intrinsic Value: Focusing on a company's fundamentals and long-term cash flow generation rather than short-term price movements.
B. The Power of the Insurance Float
A significant driver of Berkshire's success is its insurance business, primarily led by GEICO. When you pay your insurance premium, the company holds that money (the "float") before it has to pay out a claim. Berkshire Hathaway has used this massive, low-cost pool of capital to fund its acquisitions and investments, essentially allowing them to invest with other people's money. It's a genius business model that has fueled their growth for decades.
C. The Diversified Empire
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Berkshire Hathaway is not just a stock portfolio; it's a conglomerate of diverse businesses. The company owns a wide range of companies, including:
Insurance: GEICO, General Re, etc.
Railroad: BNSF Railway
Energy and Utilities: Berkshire Hathaway Energy
Manufacturing, Service, and Retail: Companies like See's Candies, Dairy Queen, and many others.
This diversification across different sectors provides stability and reduces the impact of a downturn in any single industry.
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Step 4: A Look at Recent Performance
While the long-term track record is unparalleled, it's also important to look at recent performance. In recent years, Berkshire Hathaway has continued to perform strongly, often outperforming major indices. For example, in the five years leading up to March 2025, Berkshire Hathaway's stock tripled, achieving a 200% increase, outperforming both the S&P 500 and the Nasdaq.
However, in the more immediate short-term, such as the 10 years ending in 2023, the performance was closer to that of the S&P 500. This is to be expected as the company's size has grown so large that finding investments that can "move the needle" becomes more challenging. Even Buffett himself has stated that the dramatic percentage gains of the past are unlikely to be replicated due to the sheer size of the company.
Step 5: The Legacy and the Future
Warren Buffett's eventual retirement as CEO and the transition to Greg Abel marks a new chapter for the company. However, Buffett has expressed confidence in his successor, emphasizing that Abel shares the "Berkshire creed" of a transparent, long-term focus. The company's core principles of value investing, disciplined capital allocation, and a focus on intrinsic value are expected to remain.
Berkshire's massive cash pile, which reached approximately $350 billion as of early 2025, presents a unique opportunity for future acquisitions and investments. This cash hoard is a strategic asset that allows them to pounce on opportunities when others are fearful.
10 Related FAQ Subheadings with Quick Answers
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How to invest in Berkshire Hathaway?
You can invest in Berkshire Hathaway by purchasing its Class A shares (BRK.A) or Class B shares (BRK.B) on the New York Stock Exchange. The Class B shares are much more affordable and have been created to be more accessible to a wider range of investors.
How to read Berkshire Hathaway's annual report?
Start with Warren Buffett's annual letter to shareholders at the beginning of the report. This letter is a treasure trove of investment wisdom and provides a clear, candid overview of the company's performance, philosophy, and future outlook.
How to understand Berkshire Hathaway's "economic moat"?
An "economic moat" is a sustainable competitive advantage that protects a company's profits. For example, Coca-Cola's moat is its powerful brand, while GEICO's is its low-cost operations. Look for what makes a company unique and difficult for competitors to replicate.
How to calculate the book value per share of Berkshire Hathaway?
The book value per share is calculated by dividing the company's total shareholder equity by the number of outstanding shares. Berkshire Hathaway's book value per share has historically been a key metric for measuring its performance, as Buffett focused on growing this value over time.
How to compare Berkshire Hathaway's performance to the S&P 500?
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The most common way is to look at their compounded annual growth rates (CAGR) and total returns over various periods, such as 10, 20, or 50 years. This shows how well Berkshire Hathaway's stock has performed relative to a broad market index.
How to interpret Warren Buffett's comments on Berkshire Hathaway's performance?
Buffett is known for his candor. He often admits to mistakes and emphasizes the importance of a long-term perspective. When he discusses performance, he often compares it to the S&P 500 and focuses on the growth of intrinsic value, not just the stock price.
How to buy Berkshire Hathaway Class A shares in India?
You can buy Berkshire Hathaway Class A shares (BRK.A) or Class B shares (BRK.B) from India through brokerage firms that offer international stock trading. The price of BRK.A is very high, so BRK.B is the more common option for retail investors.
How to find out about Berkshire Hathaway's latest investments?
Berkshire Hathaway discloses its major stock holdings in its quarterly 13F filings with the U.S. Securities and Exchange Commission (SEC). These filings provide a snapshot of their equity portfolio.
How to understand the different classes of Berkshire Hathaway shares (BRK.A vs. BRK.B)?
Class A shares (BRK.A) have a much higher price per share and carry more voting rights. Class B shares (BRK.B) are much cheaper and have less voting power, making them more accessible to individual investors.
How to know if Berkshire Hathaway's performance will continue after Warren Buffett?
While Warren Buffett's influence is immense, the company's decentralized structure and the strong business culture he built are key to its future. The investment team, led by Ted Weschler and Todd Combs, and the operational leadership under Greg Abel, are expected to continue the core investment and business philosophy.
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