Warren Buffett is one of the greatest investors of all time, and his company, Berkshire Hathaway (BRK.A 0.36%) (BRK.B 0.21%), has greatly rewarded its shareholders. From 1964 to 2020, Berkshire's stock delivered a compound annual growth rate of 20%. In comparison, the S&P 500 Index generated an annualized gain of 10.2% -- including dividends.
Berkshire has earned a large portion of its ever-increasing value through its own investment portfolio. Now 91 years old, Buffett has given some of the company's investing responsibilities to his lieutenants. However, the Oracle of Omaha is certainly still involved in at least some of the decision-making. Let's take a look at how Berkshire's equities portfolio has performed this year.
Did Buffett beat the market?
Over the past few years, Berkshire's stock portfolio has traded blows with the S&P 500. In 2019, the fair value of Buffett and Berkshire's portfolio climbed a whopping 44%, compared to the S&P 500's very respectable 29% gain. But last year, the S&P squeaked out a win, rising 16.3%, compared to the 13.4% gain in Berkshire's stock portfolio.
Image source: Getty Images.
2021 is not finished yet, but we'll look at results through market close on Dec. 15 to get an idea. The fair value of Berkshire's portfolio at the end of 2020 was $281.1 billion. As of Dec. 17, the value of Berkshire's portfolio had risen to about $343.1 billion, resulting in a nearly 22% gain. The S&P has climbed roughly 25% this year, edging out Berkshire.
Here, you can take a look at what has done well in Berkshire's portfolio, as the top 10 holdings make up about 85% or more of the entire portfolio.
| Company | Dec. 31, 2020 | Dec. 15, 2021 | Return* |
|---|---|---|---|
| Apple (AAPL -0.81%) | $132.69 | $171.84 | 32.8% |
| Bank of America (BAC 1.59%) | $30.31 | $43.66 | 45.4% |
| American Express (AXP -0.31%) | $120.91 | $157.59 | 33.5% |
| Coca-Cola (KO 0.78%) | $54.84 | $58.42 | 10.7% |
| Kraft Heinz (KHC 0.85%) | $34.64 | $35.77 | 4.5% |
| Moody's Corp. (MCO 1.26%) | $290.24 | $394.32 | 35% |
| U.S. Bancorp (USB -3.61%) | $46.59 | $55.72 | 20.8% |
| Verizon (VZ 0.03%) | $58.75 | $52.46 | (10.9%) |
| BYD (BYDD.F -0.46%) | $26.43 | $33.73 | 20.3% |
| Bank of New York Mellon (BK 0.85%) | $42.44 | $57.21 | 37.2% |
Source: Publicly available stock price information
*This doesn't account for dividends; some of these position sizes may have changed this year, affecting the cost basis; and Berkshire's holdings in BYD are on the Hong Kong Stock Exchange, so we'll use the ticker more relevant to U.S. retail investors.
As you can see, Apple, Berkshire's largest holding, continued to perform well and has climbed nearly 33% this year. Buffett's taking to financials has certainly paid off as well, with Bank of America, American Express, Bank of New York Mellon, and Moody's all showing gains of roughly one-third or more this year. Banks got beaten down during the brunt of the pandemic, as the sector is heavily linked to the economy, and there was an unprecedented amount of economic uncertainty in 2020.
But along with some help from the federal government, banks emerged from 2020 in a much better position, with very few credit issues and strong earnings given the circumstances. Areas of struggle in Berkshire's portfolio this year have been Kraft Heinz, which only rose 4.5% during a strong year for the market, and Berkshire's fairly new position in Verizon, which has been the biggest loser within Berkshire's top 10 holdings.
Heading into 2022
While Berkshire's stock portfolio may end up losing out to the S&P this year, I like its chances heading into 2022. The Federal Open Market Committee, in its final meeting of the year, released new projections that suggest it could raise its benchmark federal funds rate three times in 2022. That should benefit bank stocks like Bank of America, U.S. Bancorp, and Bank of New York Mellon. With the consumer strong and with a healthy economy still expected next year, that should also bode well for American Express.
While the three rate hikes and higher inflationary environment may make market conditions more difficult for many growth and tech stocks, Buffett and Berkshire's portfolio is well-positioned to battle the conditions.
