Of course! Let's dive deep into the phenomenal performance of Berkshire Hathaway, the investment powerhouse helmed by the legendary Warren Buffett.
How Well Has Berkshire Hathaway Performed? A Comprehensive Step-by-Step Guide
Hello there! Are you ready to unravel the incredible story of one of the most successful companies in history? If you're an investor, a business enthusiast, or just someone curious about the magic behind Warren Buffett's empire, you're in the right place. We're about to take a journey through decades of performance, strategic decisions, and the enduring philosophy that has made Berkshire Hathaway a true market champion.
Let's start this journey together. Grab a cup of coffee and settle in, because this is going to be a fascinating ride.
Step 1: Understanding the Foundation of the Empire
Before we can appreciate the numbers, we need to understand what Berkshire Hathaway truly is. It's not just a stock you buy; it's a diversified conglomerate with a unique business model.
1.1. The Transformation from Textile Mill to Titan
Did you know Berkshire Hathaway started as a struggling textile company? In 1965, Warren Buffett took control of the failing business. He didn't just turn it around; he transformed it into a sprawling empire with a portfolio of wholly owned subsidiaries and a massive equity portfolio of publicly traded stocks. This metamorphosis is the very essence of its long-term success.
1.2. The Two Pillars of Berkshire Hathaway
Berkshire's performance is driven by two main engines:
Wholly Owned Businesses: These are companies that Berkshire Hathaway owns outright, such as GEICO (insurance), BNSF Railway (freight rail), Berkshire Hathaway Energy (utilities), and many more. These businesses generate steady, predictable cash flows.
The Equity Portfolio: This is Berkshire's massive portfolio of minority stakes in publicly traded companies. This is where you'll find the famous "Buffett stocks" like Apple, Coca-Cola, and American Express. These investments provide substantial capital gains and dividends.
Step 2: A Look at the Legendary Long-Term Returns
Now, let's get to the heart of the matter: the numbers. The performance of Berkshire Hathaway is measured not in months or quarters, but in decades.
2.1. The Compounded Annual Growth Rate (CAGR) Since 1965
This is where the magic of compounding truly shines. From 1965 to 2024, Berkshire Hathaway achieved a 19.9% compounded annual return. To put that into perspective, the S&P 500, with dividends included, returned about 10.4% per year during the same period.
Think about this: An initial investment of $10,000 in Berkshire Hathaway in 1965 would have grown to approximately $550 million by 2024. That's a mind-blowing total return of over 5,500,000%. Meanwhile, the same $10,000 in the S&P 500 would have grown to around $3.9 million, a fantastic return on its own, but dwarfed by Berkshire's performance.
2.2. Outperforming the Market in the Long Run
For over 40 out of 60 years, Berkshire Hathaway's stock has outperformed the S&P 500. This is a remarkable feat of consistency and a testament to Buffett's disciplined investment philosophy. While there have been periods, particularly during tech-led bull markets, where Berkshire has lagged behind the S&P 500, its conservative, value-oriented approach often shines during times of market volatility and economic uncertainty.
Step 3: Analyzing Recent Performance
While the long-term track record is unparalleled, it's also important to see how Berkshire has performed more recently.
3.1. Performance of Class A (BRK.A) and Class B (BRK.B) Shares
Berkshire Hathaway has two classes of stock: Class A (BRK.A) and Class B (BRK.B). The Class B shares were created to be more affordable for individual investors. The Class A shares are known for their incredibly high price, reflecting the company's long-term growth. As of late June 2025, the BRK.A shares were trading around $730,000+, while the BRK.B shares were around $485. The performance of both classes is fundamentally linked, with the B shares being a fraction of the A shares' value.
Recent Returns (BRK.B):
1-Year Return: Approximately 19.38%
3-Year Return: Approximately 77.58%
5-Year Return: Approximately 174.09%
These recent returns demonstrate that Berkshire Hathaway has continued to deliver strong performance, especially compared to the broader market in certain timeframes.
3.2. A Look at the Portfolio's Composition
Berkshire Hathaway’s stock portfolio is highly concentrated. A large portion of its invested assets is in a few key stocks. For example, as of March 2025, almost 60% of the portfolio was invested in just four companies:
Apple (AAPL): ~25.8% of the portfolio
American Express (AXP): ~15.8% of the portfolio
Coca-Cola (KO): ~11.1% of the portfolio
Bank of America (BAC): ~10.2% of the portfolio
The performance of these core holdings has a significant impact on Berkshire's overall equity portfolio returns. The phenomenal returns from companies like Apple have been a major driver of growth in recent years.
Step 4: Decoding the Warren Buffett Philosophy
Berkshire's performance is a direct reflection of Warren Buffett's timeless investment philosophy. It's not about complex mathematical models or high-frequency trading; it's about a few key principles.
4.1. The "Economic Moat" and Value Investing
Buffett looks for companies with a durable competitive advantage, or an "economic moat." This could be a powerful brand, a low-cost production model, or a network effect. He buys quality businesses at a fair price, not fair businesses at a wonderful price. This approach prioritizes long-term value over short-term gains.
4.2. Patience and Discipline
One of the most powerful lessons from Buffett is his patience. He is willing to sit on a massive cash pile when he can't find attractive investment opportunities. This discipline prevents him from making rash decisions and allows him to act decisively when opportunities arise, especially during market downturns.
As of early 2025, Berkshire Hathaway held a record cash reserve of over $330 billion, a sign that Buffett and his team are waiting for the right opportunities to deploy that capital.
Step 5: The Challenge of Scale
While Berkshire's size is a sign of its success, it also presents a challenge.
5.1. Finding "Elephant-Sized" Deals
With a market capitalization over $1 trillion, it's becoming increasingly difficult for Berkshire Hathaway to find investments that are large enough to move the needle. A small investment that doubles in value won't have a significant impact on the company's massive balance sheet. This is why Buffett often looks for entire businesses to acquire, a strategy that is becoming more challenging as the company grows.
10 Related FAQ Questions
Here are some quick answers to common questions about Berkshire Hathaway's performance.
How to understand Berkshire Hathaway's investment strategy? Berkshire Hathaway's strategy is centered on value investing, which involves buying shares in fundamentally strong, well-managed companies with durable competitive advantages (economic moats) at a reasonable price, and holding them for the long term.
How to compare Berkshire Hathaway's returns to the S&P 500? Historically, from 1965 to 2024, Berkshire Hathaway's stock (BRK.A) has significantly outperformed the S&P 500, with an average compounded annual gain of 19.9% versus the S&P 500's 10.4%.
How to interpret Warren Buffett's annual letter to shareholders? The annual letter is a crucial document that provides insights into Berkshire's performance, philosophy, and future outlook. It's known for its candor and transparency, with Buffett often discussing both successes and mistakes.
How to buy Berkshire Hathaway shares from India? Indian investors can buy Berkshire Hathaway shares (BRK.B) through brokerage platforms that offer access to U.S. stock markets. You will need to open an international trading account with a broker.
How to analyze the performance of Berkshire Hathaway's wholly owned subsidiaries? The performance of these private companies is detailed in Berkshire's annual reports and quarterly filings. You can look at the revenue and earnings contributions from key segments like insurance, railroad, and utilities.
How to calculate the return on a Berkshire Hathaway investment? You can calculate your return by comparing the current market value of your shares to your initial investment amount, factoring in any share splits (like the creation of BRK.B shares). A simpler way is to use online stock calculators.
How to find Berkshire Hathaway's portfolio holdings? Berkshire Hathaway discloses its equity holdings in a quarterly filing with the U.S. Securities and Exchange Commission (SEC) called a 13F. This is a public document that lists all of its stock positions.
How to understand the difference between BRK.A and BRK.B shares? BRK.A shares are the original, very expensive shares. BRK.B shares were created to be a more accessible, lower-priced alternative. The B shares have a smaller claim on the company's earnings and fewer voting rights.
How to evaluate Berkshire Hathaway's cash position? Berkshire Hathaway's massive cash pile is a key metric. A large cash position shows that Buffett is being disciplined and waiting for opportunities, but it also presents a challenge in finding profitable ways to deploy that capital.
How to assess the future performance of Berkshire Hathaway after Warren Buffett? Succession planning is a key consideration. Greg Abel has been named as the successor CEO, and Buffett has expressed confidence in his ability to continue the Berkshire creed and maintain its successful business philosophy. While the future is uncertain, the company's culture and decentralized structure are designed for long-term endurance.
