Berkshire Hathaway (NYSE:BRKA) (NYSE:BRKB) shares have come a long way from their humble beginnings. Each share of Berkshire ‘A’ was worth around $750 in December 1982. Today, an investor would have to hand over a staggering $476,000 for one.
But what if I’d invested just one year ago? Has Warren Buffett — the chairman and CEO of Berkshire Hathaway — been able to beat the index?
A good year?
With £500, naturally I wouldn’t have been able to afford a Berkshire ‘A’ share a year ago. Instead I would have had to buy the ‘B’ shares.
Class B shares, first issued in 1996, are more modestly priced and have a correspondingly modest share of equity value in the company.
So, one year ago, I could have just about afforded two Berkshire B shares with my £500. And today, that those two shares would be worth 1.5% more than they were a year ago.
That’s not a great return. However, the weakening pound would have inflated the value of my investment. Today, I’d have about £560 as the pound is around 10% weaker.
However, these returns are relatively impressive when we consider that the S&P 500 — an index tracking the stock performance of 500 large companies listed on stock exchanges in the US — is down 19% over 12 months.
Is now the time to buy?
There’s only one thing stopping me buying Berkshire Hathaway shares, and that’s the strength of the dollar. With the exception of Liz Truss’s time as PM, the pound has never been weaker against the dollar.
The problem is, any gains I’d make through buying and holding Berkshire Hathaway shares could be wiped out by an appreciating pound.
To some, that might not sound too likely right now. But I can’t see things getting much worse. The UK’s economic performance is weak, but something has to change.
And exchange rate fluctuations can have a disproportionately large impact on investments. For example, the pound was down 20% versus the dollar (over 12 months) at its nadir this year. Currencies can fluctuate as wildly as stocks.
But when it comes to the Berkshire portfolio, who am I to comment? Buffett is one of the most successful investors in the world, delivering massive returns over his five decades at the helm.
Yet it’s worth noting that he and vice-chairman Charlie Munger are both in their nineties. They’re unlikely to be running the company for much longer. Although, I’d expect their successor(s) to carry on their success.
The portfolio actually has a rather limited number of holdings (53) considering its size ($680bn). Only one of which is a British firm. But this is because Buffett likes to stick to what he know and only invests in quality companies. This is just one of the core tenets of his value investing strategy that has served the business so well.
