Warren Buffett, the legendary investor and chairman of Berkshire Hathaway, has been making his own recent retirement plans known. At 94 years of age, he’s due to retire at the end of this year. Buffett’s stewardship through the decades has turned Berkshire Hathaway into a behemoth. What was once a failing textile company has evolved into a $1.2 trillion conglomerate, known for its wildly successful and varied portfolio – from railroads to insurance to ice cream to rechargeable batteries.
Though a big announcement like this would lead you to think differently, Berkshire Hathaway just posted earnings that were below expectations. In its first quarter, the company earned $4.47 per Class B share. This was well short of the consensus forecast, which had expected earnings of $4.72. Furthermore, the company’s adjusted earnings were $9.64 billion, down 14% year over year. These numbers paint a picture of an aging conglomerate grappling with a very real set of growing challenges while still boasting a Teflon-like image of management discipline.
Berkshire Hathaway has produced truly exceptional returns during Buffett’s tenure. Since his takeover in 1965, the impact on his company’s stock has been nothing short of legendary, up an astounding 5,502,284%. By contrast, the S&P 500 has roughly tripled (up ~39,054%) over that same time span. This extraordinary accomplishment is a testament to Buffett’s investment wisdom and practice that has always prioritized long-term growth and value investing.
The company operates with two classes of stock: Class A and Class B. Class A shares are significantly more expensive and hold much more voting power than their Class B peers. Berkshire Hathaway’s stock has vastly outperformed the S&P 500 over the last two decades. This success is particularly impressive given the recent challenges to earnings.
So far, investors have enjoyed huge gains from their investments in Berkshire Hathaway. For example, an investment of $1,000 just 20 years ago would be worth an estimated $1,263 today. The $1,000 investment you’d have made in 1965 has magically morphed into an equally astounding $9,178 today. Production capacity up 818%! This translates to an incredible increase of 817.8%!
Buffett’s retirement will be a significant and sad close of an era for Berkshire Hathaway. Set against an arrogant Silicon Valley future, his disciplined, methodical management style has fueled the company’s success. Simultaneously, his unconventional investment approaches have motivated millions of investors across the world. As he looks toward the door, the next administration’s leadership will face the defining test. In the process, they need to honor their industry’s legacy while deftly avoiding shifting and sometimes choppy economic waters.
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