The markets have been anything but boring lately, with wild swings up and down over the past two months in particular. If you find it all a bit unsettling, consider Berkshire Hathaway (NYSE:BRKa) - the most consistent stock on the market.
Some might even call the company run by Warren Buffett for almost 60 years boring — and with all the drama playing out in the markets lately, boring is just fine.
Consider this: Berkshire Hathaway has not had a year with a negative return since 2015 — not in 2022 when the S&P 500 was down 19%, and not in 2018, when the benchmark fell 6%.
Berkshire Hathaway’s consistency and ability to generate positive returns in all different types of markets and economic environments makes Berkshire Hathaway a great stock to own, particularly now, with uncertainty and volatility ahead.
An all-weather stock that doesn’t track with markets
Berkshire Hathaway stock has generated positive annual returns for nine straight years, and that is a feat that very few stocks can match when you consider that the markets were down in 2022 and 2018.
Since 2005, it has had only three negative years — 2008, when it fell 32% but beat the S&P 500, which plummeted 38% that year; 2011, when it fell 5% and the S&P 500 was flat; and 2015, when Berkshire Hathaway stock dropped 12% and the market was down 1%.
This year has been another stellar year for Warren Buffett’s company, as Berkshire Hathaway stock is up 26%, beating both the Nasdaq and the S&P 500.
Over the past five- and 10-year periods, it has also outperformed. Over the past five years, Berkshire Hathaway has posted an average annualized return of 16.8%, beating the S&P 500 and the Nasdaq. Over the past 10 years it has generated an average annualized return of 12.6%, beating the S&P 500, but falling short of the Nasdaq’s 14.4% annualized return.
The major benefit of owning a boring, steady stock like Berkshire Hathaway in a diversified portfolio is that it can provide balance during times of volatility, because it often doesn’t track with the major benchmarks. So, while you may see the Dow plunge 1,000 points or the Nasdaq sink 5%, Berkshire Hathaway stock will likely be unaffected by those short-term swings and will help limit those losses.
Why Berkshire Hathaway is so steady
It is no fluke or accident that Berkshire Hathaway stock has been so consistent over the years; it is by design.
Buffett built the company to perform in all cycles. The part of the company that gets the most attention is its $285 billion portfolio of stocks, that has averaged about a 20% annual return since Buffett took over as CEO in the 1960s.
But the part of the company that keeps it growing and moving forward, particularly in difficult markets, is the portfolio of some 75 private companies that Berkshire Hathaway owns or has a majority stake in.
The portfolio of private companies includes some household names like Duracell, Fruit of the Loom, GEICO, and Dairy Queen, but it also includes a lot of consumer defensive companies — those built to perform no matter the market. These include insurance companies, railroads, construction firms, homebuilders, energy companies, clothing retailers, among others.
So, when markets are up, the stock portfolio typically leads the way, but when markets are flat or down, the privately owned businesses buoy Berkshire Hathaway’s earnings.
Berkshire Hathaway stock is a buy no matter the market, but it should be particularly attractive to investors right now, when boring is good.