If I’d invested $1,000 in Berkshire Hathaway shares 25 years ago, here’s how much I’d have now!

What will I do with the spare $461,705? One interesting option might be to buy Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) shows ‘A’ class. This is the original Berkshire stock, which has been publicly traded since 1965 without ever undergoing a stock split.

Unfortunately, I don’t have that kind of money. However, thanks to the ‘B’ class shares in Warren Buffett’s holding company trading at a more affordable $304.02. Introduced in 1996, this Berkshire Hathaway stock allows small investors to gain exposure to Buffett’s portfolio.

So, how would my investment fare if I invested $1,000 in a company’s ‘B’ class stock shortly after it was first issued? Let’s explore.

25 years back

In 1998, Berkshire’s stock was trading at $37.38. At that price, buying 27 shares would cost you more than $1,000 — $1,009.26, to be exact.

Accounting for the stock split that happened in 2010, my initial investment would be $8,208.54 today. It increased by 713%, which beat the compound annual growth rate S&P 500 over the same period – even with reinvested dividends.

Given sterling’s underperformance against the dollar over that period, my return would have been greater if measured in GBP.

Unlike large companies, Berkshire does not pay dividends. Instead, Buffett prefers to increase shareholder value through new investments or share buybacks. In its latest annual letter, the Oracle of Omaha has strong words for buyback critics, branding it “either an economic illiterate or a silver-tongued demagogue“.

Value Investing

So, it’s clear that Berkshire Hathaway stock has been a good investment for the past two and a half decades. But, are companies investing now?

A glance at Berkshire’s top position shows Buffett’s confidence in his favorite stock picks. The top five companies in the portfolio make up more than 75% of its value.

In addition, the company’s cash hoard has swelled to $128.65bn. As the stock market looks set to experience further turmoil in 2023, Buffett’s cash position serves as a useful reminder that cash is indeed king in the event of a financial panic.

Should I buy Berkshire Hathaway stock?

I already have Berkshire shares in my portfolio. I am comfortable with my position and will continue to hold the shares I have.

One big risk that the company faces is the fact that its reputation as an investment to beat the market is inseparable from the unique ability of the chairman. Buffett is 92 years old, and vice chairman Charlie Munger is older at 99.

Berkshire’s future without Buffett and Munger at the helm has yet to be tested. However, Buffett has assured investors that the company “100% prepared for [their] depart”praise the management culture “a rarity in a giant company”.

I trust Buffett’s judgment. This includes the succession plan for the company and the team the billionaire has assembled over the years. As such, Berkshire Hathaway stock will continue to be an important part of my portfolio for years to come.