By Blake Anderson, CFA®, Associate Portfolio Manager
Warren Buffett’s departure from Berkshire Hathaway doesn’t feel like the typical CEO retirement. Buffett’s leadership of Berkshire Hathaway stands as one of the most impressive track records in corporate America, both from an operational standpoint and an investment performance standpoint. I wrote about Berkshire’s Rise to $1 Trillion when it hit that milestone in late 2024. And although even a second blog can’t do justice to Mr. Buffett, it’s worth it to close the books on his track record. While the Oracle of Omaha promises to continue writing occasionally, I can’t help but wonder what wisdom investors may be missing.
Berkshire Hathaway stock under Buffett’s leadership has trounced the performance of the broader S&P 500. If an investor purchased $100 of the S&P 500 in 1965 when Buffett took over as CEO of Berkshire Hathaway, that $100 in the index would now be worth about $45,350 (a cool 10.5% compounded growth rate). But that same $100 invested in Berkshire Hathaway would be worth an astounding $6,088,347 (an impressive 19.8% compounded growth rate), and worth 134 times more than the investment in the index.
A remarkable hypothetical about Berkshire’s performance during Buffett’s tenure is that the share price could decline by 99% and still be outperforming the index since Buffett’s run began.
Berkshire’s relative performance has been treading water in recent years, however. Comparing the value of that $100 invested in either the S&P 500 or Berkshire over the decades reveals that Berkshire’s outperformance peaked in 2008, at roughly 180 times the value. Said differently, Berkshire stock has underperformed the broader index (though not by much) since 2008, with the company’s stock returning 681% compared to the index’s 946% gain. While several factors may have contributed to this – be it Berkshire’s underinvestment in technology-focused companies, or the firm’s recent build in cash reserves – these also may help Berkshire stand in a defensive position during a potential market downturn and help the company take advantage of the environment should tough times return.
Buffett’s legacy isn’t just performance; his philosophy has influenced the minds of countless investors. He has used annual meetings and shareholder letters to emphasize durability over excitement, cash flow over narratives, and character over credentials in management teams. These ideas sound obvious now, but they were not mainstream when he began.
His lessons have reshaped how investors think about businesses – and I’m one of those investors he helped teach! I’ve had the pleasure of attending a handful of Berkshire’s annual meetings, as well as the incredible opportunity to meet the man himself back in 2018 (that’s me just over his left shoulder!) I sure hope some of his wisdom rubbed off on me that day.
Mr. Buffett’s businesses have grown to employ hundreds of thousands. He’s been a champion of American exceptionalism. He’s delivered one of the longest and strongest stock market returns to shareholders. And he’s shaped the minds of countless investors, entrepreneurs, and operators. One of his most famous sayings is ‘ask what won’t change in the future.’ Although Warren Buffett waving goodbye will usher in his first title change in 60 years from CEO, hopefully, his legacy endures.
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