Berkshire Hathaway didn't beat the market this year, but Warren Buffett's track record is unmatched

Published Sun, Dec 31 20237:27 AM EST

Shares of Berkshire Hathaway were up about 16% this year after climbing to an all-time high, but the conglomerate still trailed the S & P 500 's 24% gain. It wouldn't come as a disappointment or surprise to Warren Buffett . The "Oracle of Omaha" has long said that while Berkshire has solid earnings power and unmatched balance sheet strength, it still might not beat the market in any given year. "I recommend the S & P 500 to people," Buffett said at Berkshire's annual meeting in 2020 . "Berkshire is about as sound as any single investment can be in terms of earning reasonable returns over time. But I would not want to bet my life on whether we beat the S & P 500 over the next 10 years." Shares of the conglomerate reached a record high in September on the back of strong operating earnings as well as billions in returns from its Treasury holdings. Berkshire's equity portfolio is also wrapping up a solid year with massive returns from Apple. BRK.A YTD mountain Berkshire Hathaway A shares One challenge to outpace the broader market consistently is the sheer amount of cash Berkshire is working with, making it very difficult for any investments to move the needle. The conglomerate's cash pile ballooned to a record $157 billion at the end of the third quarter. "If you work with small sums of money, I think there is some chance of a few people that really do bring something to the game," Buffett said. "But I think it's very, very hard for anybody to identify them. And I think that when they work with large funds, it gets tougher." "It's certainly gotten tougher with for us with larger funds. And I would make no promise to anybody that we will do better than the S & P 500," he said. Still, Buffett's long-term track record is unparalleled. Berkshire, which cuts across 40 industries and 60 companies, has doubled the average annual return of the S & P 500 since Buffett first took control back in the LBJ years. Berkshire's compound annual gain was 19.8% from 1965 through 2022, compared with 9.9% for the S & P 500. That's an overall total return of 3,787,464% vs. 24,708% for the benchmark. Many Berkshire shareholders were made millionaires by Buffett's shrewd moves and patient value philosophy over the years. Another factor that makes Berkshire unique is the alignment between the top boss and its shareholders. Berkshire's shareholders tend to be long-term investors just like Buffett, using their stock as a savings account. "But what I will promise them is that I've got 99% of my money in Berkshire, and most members of my family are — may not be quite that extreme, but they're close to it," Buffett said. "I do care about what happens to Berkshire over the long period about as much as anybody could care about it."

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