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Deep Dive: Warren Buffett and Berkshire Hathaway are once again outperforming the stock market. Apple is one big reason but these other 10 stocks also helped

During the long, tech-driven bull market, you may have seen more than one article suggesting Berkshire Hathaway CEO Warren Buffett’s investing style was no longer valid.

With Buffett leading the conglomerate’s annual meeting on April 30, this is a good time to take a fresh look at Berkshire’s performance. The notion that Buffett is outdated may itself be outdated.

The naysayers had their moments. After all, for five years through 2019 — before fiscal and monetary stimulus in response to the pandemic distorted financial markets — Berkshire Hathaway’s Class B shares
BRK.B,
-0.02%

rose 51%, while the Dow Jones Industrial Average
DJIA,
+0.19%

returned 81% and the benchmark S&P 500 Index
SPX,
+0.30%

returned 74%, with dividends reinvested. (Berkshire Hathaway doesn’t pay dividends.)

For five years through 2020 — an amazing year for technology stocks — Berkshire’s Class B shares rose 76%, while the Dow returned 98% and the S&P 500 returned 103%.

Now look at a five-year chart showing returns for all three through April 26, 2022:

FactSet

Berkshire is ahead for five years. But one five-year snapshot doesn’t tell the whole story. Here are two tables showing returns for all three for various periods.

First, total returns through April 22:

Total return – 2022 through April 26

Total return – 3 years

Total return – 5 years

Total return – 10 years

Total return – 15 years

Total return – 20 years

Berkshire Hathaway Inc. Class B

11%

54%

97%

311%

356%

611%

Dow Jones Industrial Average

-8%

34%

77%

219%

269%

446%

S&P 500

-12%

49%

91%

263%

279%

477%

Source: FactSet

And now average annual returns for various numbers of years through April 22:

Fund or index

Average return – 3 years

Average return – 5 years

Average return – 10 years

Average return – 15 years

Average return – 20 years

Berkshire Hathaway Inc. Class B

15.6%

14.6%

15.2%

10.6%

10.3%

DJ Industrial Average

7.8%

9.6%

9.7%

6.4%

6.2%

S&P 500

12.4%

11.8%

11.5%

7.1%

7.0%

Source: FactSet

Berkshire’s returns have beaten those of the Dow and the S&P 500 for all the periods shown above, strikingly so for the longer periods.

Having a good 2022 while the broad market has declined is, of course, an important part of the story.

One criticism of Buffett’s approach — especially during periods when Berkshire’s stock underperformed the broad market — has been an inability to make new acquisitions that are “large enough to move the needle,” because Berkshire Hathaway is such a large conglomerate. Its market capitalization is about $733 billion.

But Buffett explains the company’s advantages in his annual letters to shareholders, including the “float” from its core insurance businesses and the high levels of free cash flow he and his colleagues have emphasized when making acquisitions over the decades.

You can read Buffett’s annual letters here, and they are instructive for any investor following any style. He also admits to making mistakes, including buying businesses that turned out to be “marginal,” as he wrote in the 2021 letter published in February.

Nobody’s perfect. But you can see above that what may appear to be an overly conservative investing style in a high-tech world can pan out well over long periods that include good and bad economic cycles. And you should also keep in mind that no matter what new technology comes about, people and businesses still need insurance.

Berkshire’s investment portfolio

Publicly traded corporations that invest in other companies’ common shares, but haven’t incorporated those businesses into their own financial statements, are required by the Securities and Exchange Commission to report their stock holdings within 45 days of the end of each fiscal quarter. These are known as 13F filings. Berkshire’s most recent 13F was filed on Feb. 14 and listed holdings as of Dec. 31.

Since then, Berkshire has built up a 14.6% position in Occidental Petroleum Corp.’s
OXY,
-0.05%

common shares.

For the most part, the Berkshire Hathaway stock portfolio information available is as of Dec. 31. So the following lists are as of that date. Berkshire is active, adding and trimming various positions in any one quarter.

According to Berkshire’s most recent 13F filing, the company held 42 common stocks with a combined market value of $330.9 billion, according to stock price information provided by FactSet. The value of Berkshire’s 5.4% stake in Apple Inc.’s shares was $157.5 billion, or 48% of the total portfolio.

Here are the 11 stocks for which Berkshire’s holdings were worth at least $4 billion as of Dec. 31:

Company

Ticker

Value of Berkshire Hathaway’s holdings – Dec. 31, 2021 ($mil)

Company market cap – Dec. 31, 2021 ($mil)

Berkshire ownership stake

Apple Inc.

AAPL,
-0.20%

$157,529

$2,913,284

5.41%

Bank of America Corp.

BAC,
+0.19%

$44,939

$364,110

12.34%

American Express Co.

AXP,
-1.34%

$24,804

$126,717

19.57%

Coca-Cola Co.

KO,
+1.08%

$23,684

$255,787

9.26%

Kraft Heinz Co.

KHC,
+1.19%

$11,690

$43,943

26.60%

Moody’s Corp.

MCO,
+0.74%

$9,636

$72,609

13.27%

Verizon Communications Inc.

VZ,
-0.40%

$8,253

$218,128

3.78%

U.S. Bancorp

USB,
-0.62%

$7,101

$83,289

8.53%

Chevron Corp.

CVX,
-0.86%

$4,488

$226,214

1.98%

Bank of New York Mellon Corp.

BK,
-0.86%

$4,203

$47,964

8.76%

DaVita Inc.

DVA,
-0.37%

$4,106

$11,592

35.42%

Sources: Berkshire Hathaway 13F filing on Feb. 14, 2022; FactSet

Click on the tickers for more about each company.

You should also read Tomi Kilgore’s detailed guide to the wealth of information for free on the MarketWatch quote page.

Don’t miss: Dividend Aristocrat stocks can help you keep ahead of inflation. These 15 take top prizes for raising payouts.

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