At nearly 91 years old, Warren Buffett looks like a warm, affable, grandfatherly sort. He lives in a quiet Omaha, Nebraska neighborhood, in the same home he purchased for $31,500 in 1958. Nothing about his appearance or his lifestyle makes obvious the fact that over the past 60 years, he went from selling bottles of Coca-Cola door-to-door for a nickel to becoming a self-made billionaire with a fortune approaching $100 billion.
Buffett didn’t create a popular social media platform like billionaire Mark Zuckerberg’s Facebook (FB), and he didn’t build computers and software for the masses like Bill Gates’ Microsoft (MSFT). In fact, he’s barely associated with the digital revolution. Very little of his profit comes from technology, which is unusual for the 21st century.
Instead, Warren Buffett spent decades examining the inner workings of all sorts of businesses, then investing in hidden gems with significant potential that had been overlooked and undervalued by the larger market. He did all of this through his holding company, Berkshire Hathaway – a company whose stock has grown approximately 2,205,700 percent since Buffett became its leader.
Certainly, there are other quality stocks that deliver impressive returns – and there are even stocks that have delivered solid returns for decades like Berkshire Hathaway. However, none have delivered the same level of profits with the same consistency for the same amount of time, so when it comes to the question, “what is the best stock in the world?” there is only one answer: Berkshire Hathaway (BRK.A).
Berkshire Hathaway Early Strategy Paid Off In Spades
The Berkshire Hathaway of today bears almost no resemblance to its roots.
The company’s history can be traced back to the 19th century and two Massachusetts textile companies, Berkshire Fine Spinning Associates and Hathaway Manufacturing. These merged in 1955 to form Berkshire Hathaway, and Warren Buffett became the combined company’s CEO in 1965.
One of Buffett’s first moves was to divest the remnants of the textile business, as it simply was not profitable. He immediately began investing in financial services companies while he explored other, less obvious opportunities.
Buffett measured prospective acquisitions by their potential, which he based on the basics like product, service, and business model, rather than their current profitability. Buffett knew that he could get struggling companies at a discount, and as long as they had basic characteristics necessary for success, he could help them realize their full value.
Meanwhile, through Berkshire Hathaway, Buffett also purchased shares in undervalued companies that he was certain could deliver long-term profits. For example, Berkshire Hathaway has a large stake in Coca-Cola (KO) – one that Buffett says he will never sell – because Coca-Cola has a brand and a product capable of weathering all sorts of economic ups and downs.
Why Is Berkshire The Best Stock In The World?
Each year, Buffett writes a letter to his shareholders describing the company’s wins, its misses, and its expectations for the coming year. Many investors – whether they hold shares of Berkshire Hathaway or not – rely on the advice in those letters to guide their own investing decisions.
That’s because Warren Buffett has proven himself to be one of the most talented investors of all time. Through Buffett, Berkshire Hathaway is widely considered to rank among the best stocks in the world.
In the decades since Buffett took on a leadership role, Berkshire Hathaway’s stock has outperformed the larger market by a substantial margin.
In 1965, shares of the company were priced at $19. Today, what have now become Berkshire Hathaway’s Class A shares are valued at more than $420,000 – or to put it another way, the value of Berkshire Hathaway’s stock has grown more than 2,205,000 percent.
Berkshire Hathaway doesn’t outperform the larger market every year – in fact, there are plenty of years when returns are in negative territory. However, Warren Buffett thinks long-term, and that has paid off handsomely for shareholders who went along for the ride.
Consider this: an investor who put $1,000 into Berkshire Hathaway stock in 1965 would have a portfolio valued in excess of $27 million today. In comparison, $1,000 invested in the S&P 500 for the same period would be worth just $200,000 today.
Will Berkshire Sustain Its Track Record?
When Warren Buffett celebrated his 90th birthday in 2020, investors and analysts who had been quietly concerned about Berkshire Hathaway’s post-Buffett future got a bit louder. Their anxiety during Buffett’s 80s was nothing compared to the idea of basing their own financial health on the ability of a nonagenarian to continue leading a major business.
The question was really very simple. Does Berkshire Hathaway’s success rely on Buffett, or can the company continue to thrive under his successor?
Buffett had been a bit cagey about the plan for filling his role as Berkshire Hathaway’s leader when he was no longer able to manage the company himself, which left many guessing about Berkshire Hathaway’s ability to maintain strong returns after Buffett.
In 2021, the question was settled once and for all. During the annual shareholder’s meeting, Buffett and Vice Chairman Charlie Munger mentioned – almost in passing – that Vice Chairman Greg Abel will eventually become Berkshire Hathaway’s leader.
That announcement settled the minds of shareholders, because Abel has been key to Berkshire Hathaway operations for many years. He has had the opportunity to learn from Buffett what works – and what doesn’t – and he is likely to move forward with the strategies and best practices that have made Berkshire Hathaway so successful since 1965.
Can Any Stock Topple Berkshire?
Berkshire Hathaway is made up of a diverse collection of strong companies and stocks that have staying power. It’s worth noting that Buffett rarely buys in during IPOs, and he doesn’t tend towards overvalued tech companies. His careful, deliberate methodology ensures long-term value, rather than the large short-term gains that come with most start-ups.
While investors in such companies do make fortunes during early high-growth days, such a strategy carries significant risk. In a majority of cases, those returns aren’t sustainable, which means today’s hot stocks can’t compete with Berkshire Hathaway over time.
The marketplace is unpredictable, and no one can say with any certainty what will happen next year, in a decade, or in another 50 years. Can any stock topple Berkshire? Perhaps. But the success of Berkshire Hathaway isn’t based on guesswork, hunches, and fads, which increases the likelihood that this stock will stay on top for many more decades to come.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.