Could buy a beachside condo... for the price of one Berkshire Hathaway Class A share (~$378K for BRK.A, ~$250 for BRK.B). Warren Buffett's legendary holding company owns businesses like Geico and Dairy Queen, and has major investments in companies like Coke and Amex. Buffett is the OG financial influencer (#finfluencer): for decades, investors have closely followed his moves. Which brings us to...
- Buffett's famous annual letter to shareholders was released Saturday. It earned $42.5B in 2020, including realized and unrealized capital gains from investments. That's about half of what it earned in 2019.
- Back to benchmark: Berkshire compares its stock performance to the S&P 500 index, which is used as a benchmark for the overall market. In 2020, the S&P 500 rose ~16% — Berkshire shares rose ~2%.
Playing it safe(r)... Berkshire has ~$138B in cash, but it didn't make any major acquisitions in 2020. It took big stakes in Chevron and Verizon, but stayed away from the blockbuster deals that made it famous. Instead, Berkshire bought back a record ~$25B of its own shares last year. Stock buybacks are kind of like presents to shareholders. By reabsorbing their own shares, companies can improve their stock prices by reducing the number of available shares — and increasing shareholders' ownership.
Buffett invests in what he knows... and he doesn't really know software and high tech. Rule #5 of Berkshire's acquisition criteria: it invests in "simple businesses (if there's lots of technology, we won't understand it)." Berkshire does have a giant stake in Apple, and took a small(er) $735M stake in cloud company Snowflake last year. But for the most part, it has stayed away from tech. Unfortunately for Buffett, Big Tech stocks currently dominate the overall market — and they rallied big in 2020. The tech-heavy Nasdaq index soared 43% last year, compared to BRK's ~2% gain.