Billionaires Bill Gates and Warren Buffett both own the stock, which has outperformed the S&P 500 over the long term.

Warren Buffett and Bill Gates have a surprising amount in common. Of course, both are among the richest people in the world. Each person donated a significant amount of money to charity. They both play bridge (often against each other). Buffett and Gates also read a lot.

They even invest in the same stocks. One stock owned by both Buffett and Gates has underperformed the market, especially over the long term.

A big winner for both billionaires.

Buffett’s Berkshire Hathaway (BRK.A -0.56%) (BRK.B 0.07%) The Bill & Melinda Gates Foundation Trust holds the following positions: kraft heinz. Berkshire’s New England Asset Management subsidiary also owns the following stocks: crown castle, microsoftand walmartAll are included in the portfolio of the Gates Foundation Trust.

But the main stock that Buffett and Gates have in common is Berkshire Hathaway itself. Most of Buffett’s wealth is invested in Berkshire. The conglomerate accounts for 16.8% of the Gates Foundation Trust portfolio, making it the charity’s second-largest holding.

Berkshire was a big winner for both billionaires. From 1965 (when Buffett took control of the company) to the end of 2023, Berkshire’s stock price soared 4,384,748%. This huge profit was more than 140 times the total profit. S&P 500 Dividends are included. Berkshire has performed well so far in 2024, recording double-digit growth.

Gates hasn’t owned Berkshire Hathaway stock for as long as Buffett. But since his foundation first purchased shares of Buffett’s company in the second quarter of 2010, Berkshire shares have increased in value more than fivefold.

Why Berkshire Hathaway Continues to Rise

Buffett’s investment strategy, which has led to Berkshire’s phenomenal success over the years, has been able to keep the momentum going. Legendary investors choose companies over stocks. And he only invests in companies with reasonable valuations relative to their long-term earnings growth potential.

Buffett once said, “Diversification doesn’t make much sense if you know what you’re doing,” but Berkshire has a diversified portfolio. The company owns more than 40 stocks across a variety of industries.

Berkshire’s cash reserves total more than $167.6 billion as of the end of 2023. As stock valuations become more attractive, look for Buffett to use that cash to raise shares of well-run companies, positioning the companies for strong growth when the market rebounds. .

While many investors (yourself included) often focus primarily on Berkshire’s investments, it’s also important to remember that the company’s internal businesses have solid growth prospects. Berkshire is also diversified in this space, operating dozens of subsidiaries in various sectors.

Some Potential Problems

Even the biggest stocks are under some pressure. Two of Berkshire’s potential problems involve Buffett.

One is that his relatively conservative investment style could cause stocks to underperform. Buffett famously avoids buying stocks outside his wheelhouse, which sometimes causes him to miss opportunities (particularly promising technology stocks).

Another thing is that Buffett and Berkshire have become practically synonymous. Berkshire’s stock price could fall if the 93-year-old billionaire experiences health problems.

But I’m not overly concerned about either issue. Berkshire’s stock performance did not decline significantly because Buffett did not buy good stocks early on. Buffett has already handed over some of his investment duties to two capable lieutenants. Berkshire’s succession plan is for Greg Abel, currently vice chairman of the company’s non-insurance division, to become CEO when Buffett steps down.

Berkshire Hathaway will be in good hands whenever Buffett is no longer able to lead the company. In the meantime (and hopefully a long time), Berkshire will have to continue making money for Buffett, Gates, and many other non-billionaire investors.