Imagine if the underperformance of Berkshire Hathaway Inc. (NYSE: BRK-B | BRK-B Price Prediction) stock does not end. It is up 10% this year, while the broader market is up 14%. That is not characteristic of the stock. In the past five years, it has risen 121%. The market is 89% higher in that time.
The stock may not come back because Warren Buffett will not be either. He departs at the end of the year. Greg Abel, who has been the head of Berkshire Hathaway Energy, will replace him as CEO. But Abel is not a stock picker. Buffett’s stock-picking prowess goes back to almost 1962, when he bought Berkshire.
Although Berkshire is largely a financial services and railroad company, most investors own the stock because of its portfolio of public companies.
Many of the stocks Buffett has bought over the years are those of America’s greatest brands. Many, over the long term, have done extremely well. The portfolio currently holds American Express, Bank of America, Coca-Cola, Kroger, Mastercard, and Occidental Petroleum.
Buffett also has cut remarkably smart deals, like the one with Goldman Sachs during the financial crisis in September 2008. He bought shares for a total of $5 billion, which gave the market confidence when financial company stocks were nosediving.
He got a 10% dividend, as well as an additional payout of $3.7 billion on a preferred dividend he received as part of the investment process. It was pure genius.
Buffett was a genius, and he is gone. Abel only needs to make one mistake, and the stock will not be back for years.
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