During the past six decades, Warren Buffett transformed Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B) into one of the premier investment vehicles in modern history.
Between 1965 and 2024, Berkshire had compound annual gains of 19.9%. That was nearly double the annualized total returns of the S&P 500. But thanks to the power of compound growth, the real performance gap was vastly larger. Berkshire has gained a total of 5,502,284% during the past 60 years -- absolutely trouncing the 39,054% of the S&P 500. Or, to make it simpler, for every dollar someone invested in Berkshire back then, they would have more than $55,000 today, while $1 put in the index would have grown into just $390 or so.
Although no investment can go up in value forever, I still think Berkshire Hathaway is positioned to continue thriving for the long run, thanks to the philosophies and strategies that made it such a huge success story in the first place. Here's why its shares look like a great buy to me right now.
How Buffett built Berkshire Hathaway into a financial behemoth
If you take a look at Berkshire Hathaway's portfolio, you will come away with two observations pretty easily. First, Buffett prefers a diversified portfolio as opposed to one that is heavily concentrated in any single industry. Additionally, Buffett loves dividend stocks.
Companies such as Apple, Coca-Cola, and Bank of America produce steady cash flow that subsequently gets used to reward shareholders, allowing Buffett to collect billions in dividend income each year.
In addition, Buffett is renowned for holding his winners for the long term (think decades). This is an important concept to understand because allowing the growth of his best stocks to compound over time while simultaneously collecting dividends (essentially being paid to own the stock in the first place) has been an epically lucrative strategy for the Oracle of Omaha.
Image Source: Getty Images.
Why Berkshire stock looks primed to soar even higher
One major piece of recent news out of Berkshire is that Buffett plans to retire at the end of the year and hand over the keys to Greg Abel. If there are two things that Wall Street doesn't like, it's unpredictability and change. With new leadership incoming, it's appropriate to wonder what may change at Berkshire.
Although I understand this viewpoint, I wouldn't obsess over the details. Abel has held enormous responsibility at Berkshire for years -- notably helping transform Berkshire Hathaway Energy (BHE) into a multibillion-dollar business spanning utilities, natural gas, real estate assets, and more.
Abel appears to be on course to take the reins while Berkshire holds record levels of cash on its balance sheet. Given his proven ability to build and scale businesses across multiple industry sectors, I'm not too worried about any major changes he might have up his sleeve.
Is Berkshire Hathaway stock a buy right now?
The chart below illustrates trends around Berkshire's forward price-to-earnings (P/E) ratio during the past year.
On the surface, the expansion in Berkshire's forward P/E may suggest the stock is overvalued. On top of that, the average forward P/E for the S&P 500 index is only 21.
Here's how I see things: First, Berkshire's returns historically aren't even in the same universe as the S&P 500 -- they are undeniably superior. And second, Berkshire stock has returned more than 13% so far this year. While this might seem a little mundane, consider that the S&P 500 is little changed, while industry leaders such as Nvidia, Apple, Home Depot, Johnson & Johnson, and many more are either unchanged or down so far in 2025.
I bring all of this up because I think Berkshire deserves to be trading at a premium. Moreover, with Abel taking over and Berkshire in a strong position of financial liquidity, I'm optimistic and excited about what lies ahead.
For these reasons, I would buy Berkshire stock hand over fist right now and prepare to hold on for the long run.
Should you invest $1,000 in Berkshire Hathaway right now?
Before you buy stock in Berkshire Hathaway, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Berkshire Hathaway wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider whenNetflixmade this list on December 17, 2004... if you invested $1,000 at the time of our recommendation,you’d have $642,582!* Or when Nvidiamade this list on April 15, 2005... if you invested $1,000 at the time of our recommendation,you’d have $829,879!*
Now, it’s worth notingStock Advisor’s total average return is975% — a market-crushing outperformance compared to172%for the S&P 500. Don’t miss out on the latest top 10 list, available when you joinStock Advisor.
Bank of America is an advertising partner of Motley Fool Money. Adam Spatacco has positions in Apple. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, and Home Depot. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
