Warren Buffett’s Berkshire Hathaway outperformed the S&P 500 in 2024, achieving its best year since 2021. The Omaha-based conglomerate’s Class A shares rose 25.5% last year, outpacing the S&P 500’s return of 23.3%. Berkshire stock topped $700,000 that same year, marking its ninth consecutive year of positive growth. BRK.A 1Y Mountain Berkshire Hathaway’s strong performance continued despite increasingly high stock prices and the Oracle of Omaha suspending Berkshire’s share buyback program. Instead, the conglomerate relied on strong operating profits this year, supported by strong investment and underwriting income from auto insurer Geico. Cash of $325 billion Interest and other investment income reached $8 billion in the first three quarters of 2024, compared to $4.2 billion a year ago. A major factor was Berkshire’s huge military budget. As of the end of September, it was approximately $325 billion, almost double the $168 billion level at the end of 2023. Although rising interest rates have peaked, they still allowed conglomerates to earn competitive profits. A treasure trove of cash. The 94-year-old legendary investor amassed an astonishing amount of cash by selling his two biggest holdings in Apple and Bank of America in 2024, a move that surprised many. He has been in a selling mood for most of 2024, selling $133 billion worth of stocks in the first three quarters of this year. The win for Geico, Berkshire’s insurance masterpiece and Buffett’s “favorite baby,” continued its turnaround story in 2024. The insurance company posted an underwriting profit of $5.7 billion in the first three quarters of 2024, more than double its total of $2.3 billion. As of 2022, Geico had incurred $1.9 billion in pre-tax underwriting losses. The slow adoption of telematics cost it market share to competitor Progressive. Telematics software programs allow insurance companies to collect customer driving data, such as mileage and speed, to help set prices. Geico helped offset weakness in Berkshire’s other insurance businesses, including Berkshire Hathaway Primary Group and Berkshire Hathaway Reinsurance Group, which posted underwriting losses in the third quarter of 2024. Buffett tempered expectations for future outperformance, citing its huge size. He pointed out that the sheer amount of money Berkshire is working with makes it very difficult to change the direction of its investments. Buffett said Berkshire’s diversified, high-quality group of businesses (from BNSF Railway to See’s Candy) should deliver “slightly better” results than the average U.S. company, but not much more. He said it was unlikely. In his 2023 annual letter, Buffett wrote, “With its current business structure, Berkshire should do a little better than the average U.S. company and, more importantly, significantly reduce the risk of permanent loss of capital.” We should be able to operate the business with a reduction in costs.” Still, Buffett’s long-term track record is unparalleled, and since he first took over in the 1960s, Berkshire, which owns 60 companies in 40 industries, has achieved double the average. Annual return of S&P500.
