Berkshire Hathaway Stock Could Drop 99% and Buffett Would Still Beat the S&P 500

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Warren Buffett, CEO of Berkshire Hathaway.

Bill Pugliano/Getty Images

Here’s an amazing statistic about Berkshire Hathaway’s stock performance since Warren Buffett took control of the company in 1965 for investors to consider ahead of Berkshire’s annual meeting on Saturday.

Given the enormous gain in Berkshire Hathaway (ticker: BRKa) class A shares, the stock could drop 99% and still be ahead of the S&P 500 index since 1965.

Barron’s calculates that Berkshire shares would have returned 10.3% annually since 1965 assuming a class A price of $4,968, or 1% of the stock’s closing level of $496,800 on Wednesday. That return compares with a 10.2% annualized return for the S&P 500 over the same period. We’re using a price of $20 per Berkshire share for the starting point in 1965.

The class A shares are the original Berkshire shares. The class B stock, which ended Wednesday at $329.58, was issued in 1996.

Our calculation was inspired by a recent tweet from Chris Bloomstran, the chief investment officer of Semper Augustus Investments Group.

Bloomstran tweeted that Berkshire could drop 99.3% now, and still have a record that beats the S&P 500 since 1965. “I mentioned that to Mr. Buffett several years ago. His reply, ‘Ben Graham would be proud. But let’s not test the math,’” Bloomstran tweeted.

Buffett was referring to Benjamin Graham, who was his mentor, the author of the “The Intelligent Investor” and one of the top value investors of the 20th century.

From 1965 through the end of 2021, Berkshire shares have generated a compound annual return of 20.1% against 10.5% for the S&P 500. Most of Berkshire’s outperformance versus the index came earlier in Buffett’s tenure as Berkshire’s CEO when Buffett, now 91, racked up huge gains in the stock market.

Over the past 20 years, Berkshire is just a percentage point ahead of the S&P 500 with a 10.3% annualized return against 9.2% for the index. Buffett scored in the 1980s and 1990s with equity investments in companies such as Coca-Cola (KO) which Berkshire still holds, Gillette, Capital Cities/ABC and the Washington Post.

Write to Andrew Bary at andrew.bary@barrons.com