FRI, DEC 30, 2022
Berkshire crushes S&P in tough year for stocks
Berkshire Hathaway's Class A shares ended 2022 with a 4.0% gain, outperforming the S&P 500's 18.1% drop (with dividends) by 22.1 percentage points.
It is the biggest margin of victory for Berkshire since its 23.2 percentage point win in 2007.
Last year, Berkshire edged out the S&P by 0.9 percentage points after losing by 16.0 percentage points in 2020 and 20.5 percentage points in 2019.
The five-year moving average, shown in orange in the chart, is now a 1.3 percentage point underperformance for Berkshire.
Buffett has repeatedly warned Berkshire investors that it will get harder to beat the S&P over time because the company is trying to invest increasingly larger amounts of money.
At the 2020 annual meeting, he said, "I believe that Berkshire is about as sound as any single investment can be, in terms of earning reasonable returns over time. But I would not want to bet my life on whether we beat the S&P 500 over the next ten years."
Berkshire's oil stocks post biggest price gains this year
Occidental Petroleum, (MarketWatch's 2022 "stock of the year") was up almost 118% this year, making it the best performing stock in Berkshire Hathaway's publicly disclosed portfolio.
Buffett started buying it in the first quarter of this year and reported owning 194.3 million shares as of the end of the third quarter. The stake is currently valued at $12.2 billion, making it Berkshire's seventh largest holding and accounting for almost 4% of the value of its portfolio.
Chevron had the second-best performance, with a 53% gain this year. At $30.5 billion, it is Berkshire's third-biggest stake by value, and is almost 10% of the portfolio's total value. Berkshire started building the position in the spring of 2020 but did most of its buying in the first quarter of this year.
Energy prices soared in the wake of Russia's invasion of Ukraine in February.
Berkshire is one of Barron's "10 Top Stocks for the New Year" again
For the second straight year, Berkshire Hathaway is one of ten stocks that Barron's thinks could outperform the market over the next 12 months.
It says the company "remains the ultimate defensive megacap stock and deserves strong consideration in investor portfolios."
Barron's likes that Buffett "roused himself from postpandemic lethargy and was an aggressive buyer of stocks this year," including Occidental Petroleum and Chevron.
It also praises his deal this year to buy property and casualty insurer Alleghany for $12 billion "on attractive terms."
Barron's notes that higher interest rates will boost returns from Berkshire's more than $100 billion of cash.
At 1.4 times estimated year-end 2022 book value, the stock looks "reasonably priced."
But Buffett's longevity as CEO is a risk. Barron's says he is "irreplaceable," but "his departure could benefit shareholders if it results in a dividend and pressures the company to break up."
Buffett publicly opposes 'hugely expensive' Omaha streetcar project
Warren Buffett doesn't say much about national politics these days, let alone local issues, but he is taking a public stand against Omaha's plans for a new streetcar route.
In a letter this week to the Omaha World-Herald, Buffett writes that he's speaking out because it's "an important matter" and the project will be "hugely expensive if implemented."
"Residents can be far better served by extended or more intensive service by the bus system.
"As population, commerce and desired destinations shift, a bus system can be re-engineered. Streetcars keep mindlessly rolling on, fueled by large public subsidies. Mistakes are literally cast in cement."
He argues that Omaha's citizens "deserve a vote on this huge commitment."
Omaha Mayor Jean Stothert tells the World-Herald she had a "friendly discussion" with Buffett about the streetcar and development in the city.
"I have great admiration for Mr. Buffett, but I respectfully disagree with his position on the streetcar."
Omaha streetcar in 1938 (Photo: John Vachon/Library of Congress)
The newspaper says it is unlikely the project will be derailed. It "overcame its last major hurdle" with the approval of $440 million in bonds to pay for it.
In addition, the streetcar is "also contractually tied to the development of a Mutual of Omaha skyscraper in downtown Omaha, a detail that adds pressure to the streetcar’s progress."
BUFFETT AROUND THE INTERNET
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BERKSHIRE'S TOP U.S. STOCK HOLDINGS - Dec. 30, 2022
Berkshire's top holdings of disclosed publicly-traded U.S. stocks, and BYD, by market value, based on today's closing prices.
Holdings are as of September 30, 2022 as reported in Berkshire Hathaway’s 13F filing on November 14, 2022, except for:
The full list of holdings and current market values is available from CNBC.com's Berkshire Hathaway Portfolio Tracker.
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Happy New Year!
-- Alex Crippen, Editor, Warren Buffett Watch