The King of Buying and Holding

$100 invested in this company in 1965 is worth $1,357,575 today. To compare a $100 invested in the S&P index in 1965 is worth $18,322 today. This company has averaged a 20% return since 1965 about doubling the S&P 500. Still don’t know who I’m talking about? If you live in Alberta there is an 85% chance you will make this company money when you pay your electricity bill this month.

The company is Berkshire Hathaway and Warren Buffett who is arguably the greatest investor of all time runs it. He has taken Berkshire from a failing textile company to the 4th largest public company in the world. Market Cap 439.85 Billion. 52 Week Range A shares $239440-$347400. P/E Ratio 45.38. 52 week range B shares $159.50-$231.61.They currently own 63 companies outright (or own enough of the company to have to report them separately from their other investments). You can see all of these companies on the link on the Berkshire Hathaway site (https://www.berkshirehathaway.com).

Berkshire employs 391,500 people worldwide through all of their companies. Berkshire Hathaway Energy invested 29Billion in renewable energy through December 31, 2019. 36.4% of all of Berkshires energy and utilities is renewable energy. Berkshire Hathaway Energy also provides 85% of Alberta’s electricity through AltaLink. Berkshire Hathaway as a whole made 24 Billion in operating earnings, 3.7 Billion of realized capital gains, and 53.7 Billion in unrealized capital gains in 2019. Berkshire does not, and probably will not ever, pay a dividend on their shares. They believe they can achieve a better return on investment for their shareholders by using that money to grow the business instead.

There are currently 2 Classes of Berkshire shares available on the market. The class A shares are more expensive than most of us mere mortals can afford at $271,515 per share, while the B class shares are currently trading for $181.21 per share. A few things to know about these classes is that the B shares only hold 1/10,000 voting rights per 1 A share. The B shares almost always trade for 1/1500th of an A share. If the B shares go up in price to a point where they are worth more than just 1/1500th of an A share, some A shares will automatically convert to B shares until the B shares are back to 1/1500th again. This does not work in reverse and as a result B shares almost always trade at a slight discount to the A shares.

At this point in time Berkshire stock is more of a safe consistent growth stock at this point. It is infinitely harder for a company this big to grow quickly than it was earlier in Berkshires history. A company that makes $1 million a year only has to buy companies/grow their income by $1 million a year to double in size where Berkshire would have to increase their income/ buy companies by at least $24 Billion to double in size which is easier said than done.

While very few people got into Berkshire right at the start, many people have made a lot of money off of owning shares of this company over the years. Even more people have made large sums of money copying Buffett’s investing style. Buying and holding good companies with good management is a sure way to make money on stocks.

The best and most used example of this is Coke (KO). Buffett first started to buy coke in 1988 not long after the Black Monday stock market crash, by the end of 1989 he had 23.35 million shares worth about 1.8 billion, 20% of Berkshires entire book value at the time. Obviously the average person can’t buy that much but returns would be the same percentage wise for a smaller dollar amount. Coke is up about 1750% since then unrealized of course. He has bought more over the years and owns about 100 million shares now. He has never sold a single share in all that time but he has made over $7 Billion in dividends since then which is well over a 100% return on investment without ever selling a single share. Buying and holding good companies can definitely make you a lot of money over time.

Another example of how even a non growth company can make you a lot of money is See’s candy. Buffett bought this company outright (which obviously the average person can’t do). See’s candy still makes about the same amount of money that it did when he bought it despite attempts to grow it, but has also provided Berkshire with 2 Billion dollars to invest in other ventures since they bought it. When I first started investing I bought shares of Finning International (FTT) for about the same the shares are worth now but I would have been up almost 18% just from the dividends without reinvesting any of them. Just because the stock price doesn’t increase doesn’t mean you can’t make money and reinvest or repurpose dividends to other investments.

There is a lot of money to be made out there if you put in the time and effort to find good companies that are undervalued and have good growth potential. It also helps if you can find ones that pay dividends. The safest companies to find that still have high growth potential are generally midsize companies. They are already making money but have not maxed out in their respective markets growth wise yet.

Extra Info/Disclaimer

Berkshires 10 largest holdings as of March 31st. (The most recent update I could find):

  1. Apple Inc. (AAPL) $88 Billion
  2. Bank of America Corp. (BAC) $24 Billion
  3. Coca-Cola Co. (KO) $18 Billion
  4. American Express Company (AXP) $16 Billion
  5. Kraft Heinz Co (KHC) $10 Billion
  6. Wells Fargo & Co (WFC) $9 Billion
  7. Moody’s Corp (MCO) $6 Billion
  8. JP Morgan Chase & Co (JPM) $5 Billion
  9. U.S. Bancorp (USB) $5 Billion
  10. Bank of New York Melon Corp. (BK) $3 Billion

The full Berkshire portfolio totalled $218 Billion on March 31st.

If you are interested in what companies Berkshire owns/ owns a large percentage of as of December 31, 2019 here it is:

Acme Brick CompanyInternational Dairy Queen, Inc.
Ben Bridge JewelerIMC International Metalworking Companies
Benjamin Moore & Co.Johns Manville
Berkshire Hathaway AutomotiveJordan’s Furniture
Berkshire Hathaway Direct Insurance Company (THREE)Justin Brands
Berkshire Hathaway Energy CompanyKraft Heinz
Berkshire Hathaway GUARD Insurance CompaniesLarson-Juhl
Berkshire Hathaway Homestate CompaniesLiquidPower Specialty Products Inc. (LSPI)
Berkshire Hathaway Specialty InsuranceLouis – Motorcycle & Leisure
biBERK Business InsuranceLubrizol Corporation
BoatU.S.Marmon Holdings, Inc.
Borsheims Fine JewelryMcLane Company
BrooksMedPro Group
BNSFMiTek Inc.
Business WireMLMIC Insurance Company
Central States Indemnity CompanyNational Indemnity Company
Charter BrokerageNebraska Furniture Mart
Clayton HomesNetJets®
CORT Business ServicesOriental Trading Company
CTB Inc.Pampered Chef®
DuracellPrecision Castparts Corp.
Fechheimer Brothers CompanyPrecision Steel Warehouse, Inc.
FlightSafetyRC Willey Home Furnishings
Forest RiverRichline Group
Fruit of the Loom CompaniesScott Fetzer Companies
Garan IncorporatedSee’s Candies
Gateway Underwriters AgencyShaw Industries
GEICO Auto InsuranceStar Furniture
General ReTTI, Inc.
Helzberg DiamondsUnited States Liability Insurance Group
H.H. Brown Shoe GroupXTRA Corporation
HomeServices of America
This is directly from Berkshire Hathaways Website

Berkshire has averaged 20% yearly returns since 1965. Slightly more than double the S&P 500.

YearBerkshireS&P 500 + Dividends Reinvested
196549.5%10%
1966(3.4%)(11.7%)
196713.3%30.9%
196877.8%11.0%
196919.4%(8.4%)
1970(4.6%)3.9%
197180.5%14.6%
19728.1%18.9%
1973(2.5%)(14.8%)
1974(48.7%)(26.4%)
19752.5%37.2%
1976129.3%23.6%
197746.8%(7.4%)
197814.5%6.4%
1979102.5%18.2%
198032.8%32.3%
198131.8%(5.0%)
198238.4%21.4%
198369%22.4%
1984(2.7%)6.1%
198593.7%31.6%
198614.2%18.6%
19874.6%5.1%
198859.3%16.6%
198984.6%31.7%
1990(23.1%)(3.1%)
199135.6%30.5%
199229.8%7.6%
199338.9%10.1%
199425%1.3%
199557.4%37.6%
19966.2%23%
199734.9%33.4%
199852.2%28.6%
1999(19.9%)21%
200026.6%(9.1%)
20016.5%(11.9%)
2002(3.8%)(22.1%)
200315.8%28.7%
20044.3%10.9%
20050.8%4.9%
200624.1%15.8%
200728.7%5.5%
2008(31.8%)(37%)
20092.7%26.5%
201021.4%15.1%
2011(4.7%)2.1%
201216.8%16%
201332.7%32.4%
201427%13.7%
2015(12.5%)1.4%
201623.4%12%
201721.9%21.8%
20182.8%(4.4%)
201911%31.5%
Compounded Annual Gains20.3%10%
Overall Gain2,744,062%19,784%
From Berkshire Hathaways Annual Report

Disclaimer: All stock prices are as of Sunday June 14, 2020. I am also long on BRK.B at the moment. I do not have a position in coke or any other of Berkshires top 10 holdings currently and do not plan to initiate one in the near future.

Published by Colby McTavish

I am a second year Heavy Equipment Technician. I also have a diploma in business management from MacEwan university. I have 2 children. In my spare time I race stock cars, play ball hockey, trade stocks and work on vehicles when I am not hanging out with my kids and my other half (who promptly notified me she was unimpressed to not be in the original version)

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