Berkshire Hathaway: A Safe Haven During Turbulent Times

Berkshire Hathaway: A Safe Haven During Turbulent Times

As investors prepare to attend the Berkshire Hathaway annual shareholders meeting, they can take comfort in owning a stock that not only trades near all-time highs, but also serves as a safe haven during tumultuous times. Berkshire Hathaway has a track record of outperforming the S&P 500 during recessions and bear markets. From 1980, the conglomerate’s shares have beaten the broader market over the course of six recessions by a median of 4.41 percentage points. Furthermore, it has outpaced the S&P 500 each time it has dropped 20% over the same period, with a median outperformance of 14.89 percentage points.

The Long-Term Focus and Conservative Investments Behind Berkshire’s Reputation for Safety

Warren Buffett’s reputation for safety is no accident, but rather a result of his long-term focus and conservative investments. Known for his value-based investing style, the “Oracle of Omaha” makes long-term bets on companies that boast strong fundamentals and are likely to see future growth. Apple, which Buffett started buying in 2016, is one of his notable winners in recent years. The iPhone maker has outperformed throughout the bear market and accounts for roughly 45% of the firm’s portfolio, driving outperformance for Berkshire Hathaway.

Buffett’s conservative stance, which has meant underperformance during bull runs, has helped the investor beat the market during periods of volatility. Part of this is due to his massive cash hoard, which grew to $128.651 billion in the fourth quarter of 2022. Buffett maintains that Berkshire will continue to hold a “boatload” of cash and U.S. Treasury bills to avoid uncomfortable cash needs during financial panics and unprecedented insurance losses.

Another factor contributing to Berkshire Hathaway’s safety is Buffett’s long-held affection for insurance companies. The well-run firms constantly review their risks to remain profitable and are huge cash generators. Berkshire has had a compounded annual gain of 19.8% from 1965 to 2022, compared to 9.9% for the S&P 500 during the same time.

Berkshire’s History of Creating Wealth for Long-Term Shareholders

For Berkshire shareholders attending this year’s conference, the stock price performance proves the value of holding shares over a long period of time. Bill Smead, founder and chairman of Smead Capital Management and a Berkshire shareholder, notes that the vast majority of attendees are over the age of 60. They have gotten rich from owning Berkshire Hathaway, as people held onto shares to their benefit.

While Buffett’s wagers haven’t always paid off, his long-term focus and conservative investments have helped create wealth for long-term shareholders. Going against the crowd has served him well throughout his career, and Berkshire Hathaway remains a safe haven during turbulent times.


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