Warren Buffett is arguably the most successful investor of all time. But even though the Oracle of Omaha is now worth nearly $90 billion, he – like many other active stock pickers – is having trouble beating the broader market lately.
Berkshire’s underperformance is particularly noteworthy considering that Buffett’s largest holding, Apple (AAPL), has nearly doubled in the past 12 months.
This means that Berkshire has done worse than the S&P 500 despite its big Apple bet. (Berkshire also has a small stake in Amazon (AMZN) but doesn’t own Microsoft (MSFT), Facebook (FB) or Google owner Alphabet (GOOGL), the other big techs that have boosted the broader market.)
Some of Buffett’s other top holdings have stumbled in the past year, and that’s dragged down the returns for Berkshire’s portfolio.
Shares of troubled Wells Fargo (WFC), US Bancorp (USB) and Delta (DAL) have lagged the S&P 500. And Kraft Heinz (KHC), which is Berkshire’s sixth-largest investment, has plunged more than 35%. Kraft Heinz (KHC) will report its latest earnings on Thursday.
Investors are watching to see if Buffett and his fellow investing gurus Todd Combs and Ted Weschler make any changes to Berkshire’s portfolio in the fourth quarter in light of the recent underperformance.
Earnings in focus
The company will reveal its updated holdings in a regulatory filing with the Securities and Exchange Commission on Friday.
Berkshire will also be reporting its fourth quarter results later this month.
Buffett gets the most attention for his investing prowess. But Berkshire is also a massive conglomerate worth nearly $560 billion. It owns Geico and other insurers, the Burlington Northern Santa Fe railroad, several energy and utility firms and a bunch of well-known consumer companies, including Duracell, Fruit of the Loom and Dairy Queen.
Buffett will probably discuss his thoughts on Berkshire’s top investments and operating businesses, the broader stock market (and possibly succession plans) in his annual shareholder letter.
Berkshire chief financial officer Marc Hamburg confirmed in an email to CNN Business that the letter will be released on the morning of Saturday, February 22.
Time to make a deal?
Berkshire has nearly $130 billion in cash on hand, and Buffett has frequently discussed a desire to make another big acquisition. But he’s been frustrated by how expensive takeover targets are in light of the long-running market rally.
Berkshire’s last major deal was the $32 billion buyout of aerospace components maker Precision Castparts in 2015.
Buffett told the Financial Times earlier this year that jeweler Tiffany (TIF) approached Berkshire in 2019 about buying the company. But Buffett said no.
LVMH, the luxury goods company run by Bernard Arnault (one of just three people wealthier than Buffett) agreed to buy Tiffany in October for $16.2 billion.
Investors are also hoping for more clarity about how exactly Berkshire will be managed after Buffett either retires – which he has given no indication he plans to do – or passes away.
Buffett turns 90 in August. Berkshire vice chairman Charlie Munger celebrated his 96th birthday on New Year’s Day.
So Berkshire could wind up being run by a committee that includes the two other Berkshire vice chairmen Ajit Jain and Greg Abel, Weschler and Combs, who also took over as Geico CEO in January.