Even a stock market deity like Warren Buffett can't escape the bears. The recent volatility in the markets has affected the great investor's vehicle Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B), whose shares have barely outpaced the S&P 500 lately.
2018 was rough for many investors, top stars included. Now that we've escaped that challenging year, perhaps Berkshire's shares are poised for a rebound. Before we explore that, though, let's take the pulse of what's going on with the company.
The Apple core
Since Berkshire is essentially an investment fund made up of Buffett's stock picks, it depends on the performance of those companies. This is what has dampened Berkshire's price growth these past few months.
The company's single largest holding in terms of market value is -- funnily enough, given Buffett's famous historical aversion to tech stocks -- Apple (NASDAQ:AAPL).
Although Apple is powerfully profitable and a consumer tech institution by this point, some of its recent fundamentals were dispiriting. Revenue from its core iPhone line has been weaker than expected -- attributable largely to the Chinese market. And although the company notched a record quarterly EPS figure, this was due in no small part to aggressive share repurchases.
Other large Berkshire holdings have also been market laggards. Big bank Wells Fargo (NYSE: WFC) just can't keep itself out of trouble, with a new scandal erupting seemingly every other month. Buffett's belief in Wells Fargo, a longtime and major Berkshire position, is admirable. But it's not doing his company many favors. A more recent big-ticket buy, Kraft Heinz, also isn't lighting the investment world on fire.
Not all is storm and gloom. With such an overstuffed stock portfolio, of course there are more than a few names bucking the recent trend of Apple, Wells Fargo, and Kraft Heinz.
One classic Berkshire holding, American Express (NYSE:AXP), has delivered several very strong quarters of late, and is being rewarded with growing investor love. The same can be said for more recent buy-ins, American Express archrivals Visa and Mastercard.
Check out all our earnings call transcripts.
Buy and hold, and hold, and hold, and...
One of the most crucial factors that has made Buffett such an outrageously successful investor is patience. Some Berkshire stocks have been in the company's portfolio not for years, but for decades. American Express has been on the list since 1964.
To use it as an example, American Express has had its share of trials and tribulations since then. A good recent(ish) example is the 2015 loss of its most significant retail partner, a blow that would have crushed a lesser company. But AmEx recovered, and eventually built on the returns its been delivering to shareholders for many years. From 1980 to the present day alone, the stock's total return is just under 11,000%.
That's an astounding number, and it reveals Buffett's ultimate strategy: Buy, hold tight and ride out the rough patches, then profit.
I doubt Warren is losing a lot of sleep over the recent iPhone sales trajectory in China, or Wells Fargo's not-exactly-authorized opening of auxiliary customer accounts. These are comparatively small bites nipping away at those stocks, but over the long term many of these companies are winners.
Unless something completely untoward and shocking occurs, Apple is going to remain a cutting-edge iDevice powerhouse. For all its controversies, Wells Fargo is still one of the top American banks, particularly in the all-important segment of mortgages. And when was the last time you bought a container of ketchup that wasn't made by Kraft Heinz?
In short, I think investors should approach Berkshire like its CEO approaches its stock investments. Berkshire has proven to be one of the best long-term plays on the market, and being patient with it should continue to reap rewards for shareholders. I wouldn't hesitate to buy its stock.