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FRI, DEC 29, 2023
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Berkshire's solid 2023 gain isn't enough to beat S&P |
Berkshire Hathaway's Class A shares ended 2023 with a 15.8% gain, notching an eighth straight year of advances. (The B shares are up 15.5%). It's the biggest gain since 2021's 29.6% surge and the second largest advance since they rallied by 21.9% in 2017.
But Berkshire underperformed compared to the benchmark S&P 500 stock index, which ended the year up 26.3%, including dividends.
(The S&P is up 24.2% when dividends are excluded. After nine straight weekly gains, it is just short of its January 2022 all-time high.) |
Berkshire's 10.5 percentage point lag versus the S&P gives it a record of six wins and four losses over the past 10 years.
Berkshire's 11.8% compound annual growth rate, however, is just below the S&P's 12.0% CAGR.
Andrew Bary at Barron's writes that Berkshire's recent underperformance is something of a mystery, given what could be a 25% gain to nearly $40 billion for its after-tax operating earnings this year. He thinks investors could be anticipating Berkshire's return on its cash will be reduced if the Federal Reserve lowers interest rates.
They may also be worried about Warren Buffett turning 93 last summer, with those concerns highlighted by the recent death of Charlie Munger.
Even so, Barron's named Berkshire one of its ten favorite stocks for 2024, citing its "Fort Knox" balance sheet, growing earnings, and a "reasonably priced" stock at "1.4 times estimated year-end 2023 book value and roughly 18 times next year's projected earnings."
It is worth noting, however, that last December Barron's also predicted Berkshire would outperform the market this year, a reminder that picking winners is tricky. |
Smaller positions post big gains, but Apple does the heavy lifting |
Several of Berkshire's smaller holdings in its publicly disclosed equity portfolio, the stocks generally chosen by portfolio managers Todd Combs and Ted Weschler, were its biggest percentage winners for the year. At $1.5 billion, just one of the top six, Amazon.com, has a portfolio value of more than $1 billion based on today's closes.
The other five are below that level: Nu Holdings ($892M), StoneCo ($193M), Lennar ($20M), D.R. Horton ($907M), and Floor & Decor ($533M).
Buffett's Japanese "trading house" investments are among the biggest gainers for the portfolio's larger year-end positions: Mitsubishi (+58%, $1.9B), Marubeni (+47%, $2.2B), Sumitomo (+40%, $2.2B), Itochu (+39%, $4.8B), and Mitsui (+38%, $4.7B).
Berkshire's Apple shares are valued at $176 billion, which is around 48% of the portfolio's total value, so that stock's 48% surge this year generated some big paper profits. The unweighted average of all the stock moves is an increase of 23.1%.
When weighted by the size of the positions, however, the gain is roughly 28%, with Apple accounting for around 23 percentage points. |
Table shows the 2023 percentage moves for all the stocks in Berkshire Hathaway's publicly disclosed equity portfolio as of the most recent filings. Percentages are not adjusted to reflect changes in the number of shares held by Berkshire during the year. (Maybe next year). Liberty Live Class A and B are listed as 0% because they have only traded for a small portion of the year. |
Berkshire's 'Squishmallows' make U.S. McDonald's debut |
McDonald's is now offering Happy Meals with "Squishmallows" toys from Jazwares, which is owned by Berkshire Hathaway.
The fast-food chain launched the partnership on Tuesday. It will continue "for a limited time while supplies last."
McDonald's Grimace is among the twelve characters included in the promotion, along with a "surprise mystery character."
There has been no indication that a Warren Buffett Squishmallow is part of the lineup, although that certainly would be a surprise and mystery for most of McDonald's younger customers. |
A Squishmallow depicting Warren Buffett at the 2023 Berkshire Hathaway shareholders meeting. Photo: REUTERS | Rachel Mummey |
BUFFETT AND MUNGER AROUND THE INTERNET Some links may require a subscription |
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HIGHLIGHTS FROM THE ARCHIVE |
Buffett would bet on monkeys throwing darts to outperform financial advisers (2022) |
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BERKSHIRE'S TOP U.S. STOCK HOLDINGS - Dec. 29, 2023 |
Berkshire's top holdings of disclosed publicly-traded stocks in the U.S., Japan, and Hong Kong, by market value, based on today's closing prices.
Holdings are as of September 30, 2023 as reported in Berkshire Hathaway’s 13F filing on November 14, 2023, except for: The full list of holdings and current market values is available from CNBC.com's Berkshire Hathaway Portfolio Tracker. |
Please send any questions or comments about the newsletter to me at alex.crippen@nbcuni.com. (Sorry, but we don't forward questions or comments to Buffett himself.) If you aren't already subscribed to this newsletter, you can sign up here.
Also, Buffett's annual letters to shareholders are highly-recommended reading. There are collected here on Berkshire's website.
Best wishes for the new year! -- Alex Crippen, Editor, Warren Buffett Watch |
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