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Warren Buffett-led conglomerate Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) has delivered a strong performance over the last few months of 2016, due to the strong performance of the company's stock portfolio as well as the positive effect a Donald Trump presidency is expected to have on many of Berkshire's subsidiary businesses. However, for 2017 to be Berkshire Hathaway's best year ever, the company's performance is going to need to be rather exceptional.

Berkshire could have a great 2017

There are several reasons to believe that Berkshire could have a great year in 2017.

For starters, although Buffett was an outspoken Hillary Clinton supporter, a Donald Trump presidency could be excellent for Berkshire's core business of insurance. Berkshire has numerous insurance subsidiaries including GEICO, Central States Indemnity, General RE, National Indemnity, Berkshire Hathaway Specialty Insurance, and others.

Insurers would benefit from the projected rising-rate environment that Trump's economic policies would help create. While it's a little more complicated than this, the general idea of the insurance business isn't to make money from the premium income collected. Rather, insurance companies make money by investing the premium income they've collected but haven't paid out yet. Obviously, if income investments (such as Treasury bonds) started paying more, insurers would make more money.

In addition, Trump's anti-regulation stance could make doing business easier and cheaper for all types of insurance companies.

Banks could benefit for similar reasons, and while Berkshire doesn't own any banks in their entirety, the company's stock portfolio is full of major financial companies, including a massive stake in Wells Fargo, as well as large positions in American Express, Bank of America, Goldman Sachs, U.S. Bancorp, among others.

Berkshire's other businesses and stock holdings could also benefit from the Trump presidency and other economic factors. Most obviously, if the "Trump rally" continues through 2017, Berkshire's entire stock portfolio could help boost the company's share price. And Trump's corporate tax plan could mean that Berkshire will pay out less of its earnings to the IRS and have more to reinvest.

Just to name a couple more potential positive catalysts:

  • Major Berkshire stock holding Phillips 66 as well as some of the company's subsidiaries could benefit from higher oil prices that are likely to come if the recent OPEC deal gets the supply/demand dynamics of the oil market under control.
  • Trump's planned tax cuts and job-creating stimulus could put more money in consumers' pockets, which could benefit Berkshire's retail-oriented businesses such as Fruit of the Loom, Duracell, Helzberg Diamonds, Pampered Chef, and others, in addition to some of the company's stock holdings such as Coca Cola, Apple, and Wal-Mart.

In a nutshell, I believe that the Trump presidency will be a positive catalyst for most of Berkshire's businesses and stock holdings, and that 2017 will prove to be a strong year for the company.

The best year yet? Probably not

While there's a good chance that Berkshire's shareholders will be extremely happy with the stock's performance in 2017, it may be wishful thinking to speculate that it could be the company's best year yet.

There's simply too high of a bar for this to be likely. To even rank among the company's top five years, the stock will need to climb by more than 80% in 2017. Look at Berkshire's five best-performing years so far:

Year

Stock Price Change

Per-Share Book Value Change

1976

129.3%

59.3%

1979

102.5%

35.7%

1985

93.7%

48.2%

1989

84.6%

44.4%

1971

80.5%

16.4%

Data source: Berkshire Hathaway.

In fact, over the 51 years during which Buffett has been at the helm, Berkshire Hathaway's stock has climbed at an average rate of 20.8%, and the company's book value per share has averaged a 19.2% gain. So, even if Berkshire adds 20% in 2017, it would actually be below-average performance for the company from a historical perspective.

It's important to mention that comparing Berkshire's current performance to its gains in the 1960s, 1970s, and 1980s isn't an apples-to-apples comparison. Even Buffett has said that Berkshire has grown to a point where sustained performance in the more than 20% range is no longer practical to expect.

The bottom line is that Berkshire has had some incredible years throughout its history. 2017 could be a great one for shareholders, but I don't foresee the stock-doubling year that would make it Berkshire's "best year ever."

Matthew Frankel owns shares of American Express, Apple, Bank of America, Berkshire Hathaway (B shares), and Goldman Sachs. The Motley Fool owns shares of and recommends Apple and Berkshire Hathaway (B shares). The Motley Fool owns shares of Wells Fargo and has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool recommends American Express and Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.