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You Won't Believe How Much More Warren Buffett Has Made Than the Market Since 1965

By Jennifer Saibil,


Legendary investor Warren Buffett did it again in 2022. His holding company, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) , outperformed the market last year, gaining 4% versus the S&P 500 's 19% drop.

Since Buffett took over in 1965, Berkshire Hathaway has beaten the market 39 out of 58 years. While that's about two-thirds of the time, it may not sound incredibly impressive at first; it's underperformed the market the other 19 years.

But that's not the whole story. Adding up all of the gains over time, Berkshire Hathaway has outperformed the market by an almost unbelievable amount.

What is Berkshire Hathaway anyway?

When investors talk about Warren Buffett's stocks , they're usually referring to the stocks in the Berkshire Hathaway portfolio. When you buy a stock, you're usually buying a piece of a business, and it's often a business you know and perhaps buy products from, such as Amazon or Coca-Cola .

Berkshire Hathaway is a holding company, which means it doesn't operate any business, but rather functions as an owner of other businesses. Investors give it funds, and it uses those funds to buy other companies, and, in Berkshire Hathaway's case, invest in the shares of other companies. It owns a number of companies with 100% or controlling ownership, such as GEICO and Duracell.

As for investing in stocks, it has large but not controlling stakes in about 45 companies, including DaVita , Kraft Heinz , and Liberty Media . The largest stock in its portfolio is Apple , which accounts for 42% of the stock portfolio.

In some ways, then, owning Berkshire Hathaway stock is similar to owning an index fund, since it gives shareholders exposure to many different stocks.

Berkshire Hathaway vs. the S&P 500

That leads us to how much owning Berkshire Hathaway since its inception would have done for your portfolio versus owning an index fund.

Cumulatively since 1965, including dividends, the S&P 500 has gained 24,708%. If all you had done 58 years ago was invest $10,000 in an S&P 500 index fund, you would have about $2.4 million today. Nearly 60 years is more time than most people have to build a retirement fund, but it gives you an idea of the power of compounding over time.

As incredible as that sounds, if you'd invested in Berkshire Hathaway in 1965, you would have much, much more money. Since that time, Berkshire Hathaway stock has gained 3,787,464%, or more than 153 times the S&P 500's gains over the same time period -- good enough to give you roughly $355 million based on a $10,000 investment. That translates to a compounded annual gain of 19.8%, or nearly double the S&P 500's 9.9% compound annual gain.

Is the party over?

These returns are outstanding. However, recent performance hasn't been as incredible. The further back you go, the wider the margins between the S&P 500 and Berkshire Hathaway. These results don't include dividend payouts.

^SPX data by YCharts

^SPX data by YCharts

Does that mean it's getting harder for Berkshire Hathaway to beat the market? Maybe. But consider how well it did in 2022.

The other way to look at it is that Buffett is an advocate of buying stock in businesses that will last. He's not into quick fixes and daily stock movements. Therefore, the advantage of owning Berkshire Hathaway stock may be more visible over time. Buffett has famously said that his favorite holding period is forever. However, people who know that quote may not know that there is a condition attached to it. Buffett said that's only the case when "when we own portions of outstanding businesses with outstanding managements."

Taking that lead, investors who are interested in learning how to invest like Buffett should consider buying stock in companies that operate outstanding businesses with great management and that hold for the long term.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends, Apple, and Berkshire Hathaway. The Motley Fool recommends Kraft Heinz and recommends the following options: long January 2024 $47.50 calls on Coca-Cola, long March 2023 $120 calls on Apple, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy .

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