Warren Buffett has an incredible track record of outperformance compared to S&P500.
At the start of each Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) annual report, he shares Berkshire Hathaway’s annual returns relative to the S&P 500 (with dividends included) for each year dating back to 1965, when he took control of the company. The results are simply remarkable. Berkshire Hathaway’s compound annual return since Buffett’s arrival is 19.8%, compared to 10.2% for the S&P 500.
Buffett has managed to achieve these results in all kinds of markets and economic conditions. His sole focus on finding great companies trading at a fair price has served him and his investors well. These stocks generally offer greater downside protection and have the potential to outperform the broader market.
So when Buffett identifies a company that he believes is expected to outperform market averages in the future, investors pay attention. Buffett outlined his expectations for such a company in his latest letter to shareholders.
According to Buffett, the stock should do better than average
Buffett manages a $376 billion stock portfolio with help from fellow Berkshire investment managers Ted Weschler and Todd Combs.
Buffett praised the operating and management teams of some of his biggest stocks, including Apple, Bank of America, American ExpressAnd Coca-Cola. These four positions combined represent more than two-thirds of the entire portfolio. And Buffett is happy to hold these shares indefinitely.
Buffett and his team recently acquired significant stakes in Western oil and Liberty Media SiriusXM inventory tracking, SiriusXM Freedom. The former has become a significant position in the portfolio, especially when considering Berkshire’s preferred shares in Occidental. Buffett also praised Occidental CEO Vicki Hollub in his latest letter to shareholders.
But according to Buffett, none of these stocks should do better than average. Or maybe they all are.
This is because Buffett believes that Berkshire Hathaway itself is the company to own. Not only does she have a significant stock investment portfolio, but she also owns an insurance business, railroad, utility and energy companies, as well as dozens of other operations.
“With our current mix of businesses, Berkshire should “should operate with significantly less risk of permanent loss of capital.
Buffett is not promising the moon by investing in Berkshire Hathaway. In fact, he thinks the days of beating the S&P 500 are in the distant rearview mirror for the company due to its massive size ($862 billion at the time of this writing). “Anything beyond ‘slightly better’… is just wishful thinking,” he wrote.
It’s also worth echoing his comments from…
