At 94 years old, the Oracle of Omaha is still in top shape. Warren Buffett, guru par excellence in the world of investment, beat Wall Street again last year. His famous conglomerate, Berkshire Hathaway, surpassed the S&P 500, the US benchmark stock index, in 2024 and achieved its best year since 2021. The Omaha, Nebraska-based conglomerate’s Class A shares rose 25.5% last year, outperforming the S&P 500’s 23.3% return.
Buffett once again takes the ‘victory’ after a 2023 in which the S&P 500 did better than Berkshire Hathaway (24.2% compared to 15.8%). In 2022, a very bad year for the American stock market due to the aggressive increases in interest rates, Wall Street lost more than 19%, while Buffett’s company managed to gain a creditable 4%. In 2021, it recorded an exceptional year with 29.6% that surpassed the not bad 26.9% of the S&P 500.
In 2024, Berkshire shares surpassed $700,000 during the year and recorded their ninth consecutive positive year. The strong performance came even as Buffett halted Berkshire’s share buyback program, with shares becoming more expensive. Instead, the conglomerate relied on solid operating profits, supported by strong investment income and the profits (difference between premiums collected and expenses and claims) from auto insurer Geico.
Interest and other investment income reached $8 billion in the first three quarters of 2024, up from $4.2 billion a year earlier, according to data compiled by the CNBC. A major factor was Berkshire’s gigantic cash pile: about $325 billion at the end of September, almost double the level of $168 billion at the end of 2023. The increase in interest ratesalthough far from its maximum level, allowed the conglomerate to obtain a competitive return on its treasury.
Buffett amassed that much cash in 2024 thanks to the active sale in its two largest holdings, Apple and Bank of America (BofA), a move that surprised many. For most of 2024, the investor was selling stocks, dumping $133 billion worth of securities in the first three quarters of the year.
Going back to GeicoBerkshire’s crown jewel and what Buffett has come to call his “favorite son,” continued its turnaround story in 2024. The insurer posted an underwriting profit of $5.7 billion in the first three quarters of 2024, more than double the 2.3 billion in the same period of 2023.
As recently as 2022, Geico suffered a $1.9 billion pre-tax loss as it sacrificed market share to competitor Progressive due to slow adoption of digitalization. The software programs allow insurers to collect customers’ driving data, including their mileage and speed, to help price policies. Geico helped offset weakness in Berkshire’s other insurance operations, including Berkshire Hathaway Primary Group and Berkshire Hathaway Reinsurance Group, which both experienced losses in the third quarter of 2024.
Despite beating Wall Street in this last year, Buffett has tempered expectations of exceptional future results citing its enormous size. The billionaire investor has noted that it is very difficult for any investment to move the needle due to the huge amount of cash that Berkshire is working with. Buffett has recognized that Berkshire’s group of diversified, quality companies –from BNSF Railway to See’s Candy– should provide “slightly better” performance than the average US company, but is unlikely to achieve anything more than that.
“With our current business mix, Berkshire should do somewhat better than the average U.S. company and, more importantly, should also operate with a materially lower risk of permanent capital loss,” Buffett said in his annual letter. 2023. “Anything beyond ‘slightly better,’ however, is wishful thinking,” he added. Still, Buffett’s long-term track record is unmatched. Berkshire, which spans 40 industries and 60 companies, has doubled the average annual return of the S&P 500 since that Buffett first took control in the 1960s.
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