Advertisement

Here's how much Warren Buffett's Berkshire Hathaway has lagged tech stocks over the last 20 years

Charlie Munger, left, and Warren Buffett, right
At the annual Berkshire Hathaway shareholder meeting, billionaire Charlie Munger said that cutting out toxic people is essential to success.Nati Harnik/Associated Press
  • Warren Buffett's Berkshire Hathaway has underperformed US tech in the last 20 years, DataTrek said.

  • An investor who put $10,000 in Berkshire 20 years ago would have $65,300 today versus $110,700 in the Nasdaq.

  • "Tech's long-run performance tells a clear story about the power of disruptive innovation."

If you had put $10,000 in Berkshire Hathaway stock 20 years ago, you would have about $65,300 today. If you had put that same money in the Nasdaq, you would have $110,700.

That's according to an analysis by Jessica Rabe at market research firm DataTrek who asked, "Would you rather have Warren Buffett manage your money or put it to work in a broad basket of US public technology companies?"

To be clear, looking at shares of the sprawling conglomerate isn't exactly the same as looking at its stock portfolio, which is more closely followed by investors. BRK's price also reflects earnings at all the company's businesses like Geico and BNSF Railway. Still, DataTrek compared the stock against tech benchmarks in a note on Tuesday.

The QQQ (which tracks the Nasdaq index) and XLX (a S&P 500 tech ETF) have beat Berkshire stock by 454 percentage points and 280 points, respectively, over the last 20 years, according to DataTrek.

The QQQ and XLX have also outperformed Berkshire when you compare returns over the past 5, 10 and 15 years. The QQQ and XLX have gained 67 and 109 percentage points more than BRK since 2018, and 149 and 226 points more since 2013. QQQ grew 762 points more and XLX grew 651 points more than BRK in the last 15 years.

"Aside from well-publicized positions like Apple and BYD, Berkshire Hathaway tends to allocate capital to older-line businesses," Rabe wrote. "Warren Buffett is one of – if not the – best money manager of all time, so we are not casting stones here. However, tech's long-run performance tells a clear story about the power of disruptive innovation."

It's not that BRK has always trailed US tech. There have been times when Berkshire outperformed the US tech sector.

Berkshire tends to outperform tech during a rebound in financial and value stocks, such as in 2010, 2013, and 2021, or when rates are rising quickly as was the case last year, Rabe noted.

But according to Rabe's analysis, the QQQ and XLX have beaten Berkshire over a given year roughly two-thirds of the time since 2010.

Those ETFs have an advantage over BRK because they "leverage disruptive innovation" instead of increasing exposure to a lot of traditional industries. Some of BRK's top holdings are in companies like Coca Cola, Kraft, and Chevron.

"The companies in XLK and QQQ employ tens of thousands of talented engineers and tech savvy business leaders with the common goal of creating and leveraging the 'next big thing,'" Rabe wrote. "This year, for example, enablers of gen AI – a truly 'new new' development – drove stock market returns both domestically and abroad."

It is well known that tech stocks have been carrying the broader market for most of this year. Dubbed the "magnificent seven," companies like Nvidia, Apple, and Microsoft have done most of the legwork lifting the S&P 500 up.

So while BRK has underperformed the overall S&P 500 as well, it's worth noting that the tech stocks alone have also outperformed the rest of the benchmark index.

Berkshire Hathaway - US Tech, 2010 to present
Berkshire Hathaway - US Tech, 2010 to presentDataTrek

Read the original article on Business Insider