Berkshire Hathaway: Easy Money Hurts Returns?
Berkshire Hathaway vs. SP 500: A 20-Year Comparison
Introduction:
Warren Buffett's Berkshire Hathaway (BRK.A, BRK.B) has been a stock market darling for decades. However, a recent analysis suggests that the easy money environment of the past several years may have taken a toll on the company's stock price returns.
Key Findings:
According to the analysis, Berkshire Hathaway's stock price returns have significantly underperformed the S&P 500 index (SPY) over the past 20 years.
While Berkshire Hathaway has increased its per-share intrinsic value through retained earnings and share repurchases, this has not translated into corresponding stock price increases.
The analysis suggests that three key components may be contributing to this underperformance: 1) a high valuation, 2) increased competition, and 3) a lack of growth in new businesses.
Implications for Investors:
The analysis raises questions about the wisdom of buying Berkshire Hathaway stock at current prices.
Investors may be better off investing in a fund that tracks the S&P 500, which has consistently outperformed Berkshire Hathaway over the long term.
However, it is important to note that the analysis does not take into account Berkshire Hathaway's unique position as a holding company with a diverse range of businesses.
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