If you follow the stock market, then you've likely heard of Berkshire Hathaway (BRK.A 1.25%) (BRK.B 1.35%). It's run by none other than Warren Buffett, arguably the greatest investor of all time, and it's one of the largest conglomerates in the world. Furthermore, the stock has widely outperformed the stock market over many decades. Between 1965 and 2024, Berkshire' stock generated compound annual gains of 19.9%. Meanwhile, the broader benchmark S&P 500 has generated compound annual gains of 10.4% including dividends. So is Berkshire Hathaway's stock a millionaire maker?
Why Berkshire has become such a powerhouse
Interestingly, Buffett in the past has spoken about how he's not a fan of diversity when it comes to investing. "Diversification is protection against ignorance," Buffett has said. "It makes little sense if you know what you are doing." But Berkshire Hathaway's stock offers investors a great deal of diversification, primarily because it has built out several strong powerhouse businesses.
Berkshire has a world-class insurance business and owns the large U.S. insurance company, GEICO. The company also generates significant earnings from owning the Burlington North Santa Fe Railroad, its slate of energy assets, and businesses in manufacturing, services, and retail. Berkshire also can generate significant earnings from investment gains in its huge $258 billion equities portfolio.
However, these can swing wildly, depending on how the market performs, and Buffett generally advises investors to put these aside and focus on operating earnings when evaluating the company. Nonetheless, Berkshire's equities portfolio has created significant shareholder value over the years. And if you look at the portfolio, there is great deal of diversity in the 38 stocks that Berkshire owns. There are large banks, oil and gas producers, large tech and artificial intelligence companies, telecommunications stocks, quick-service restaurants, grocers, and much more.
Berkshire has also achieved such scale that it can stay conservative when it feels prudent. In recent years, Berkshire has built a staggering cash pile. At the end of 2024, the company had more than $345 billion of cash, cash equivalents, short-term U.S. Treasury bills, and investments in fixed maturity securities. It is perhaps this reason, along with the company's strong management team and track record, that has made investors view the stock as a flight to safety. Berkshire has widely outperformed the broader market amid the chaos that has ensued this year.
Investors seem to be even more impressed with Buffett and his team's ability to stay disciplined and stick to the same fundamentals and investing principals that succeeded so well for decades. While investors continued to pour into the bull market last year, running up stocks to nosebleed valuations, Berkshire was a net seller of stocks and purchased very few new shares, while repurchasing much fewer of its own shares than years past.
Is Berkshire a millionaire maker?
Many, many investors have made millions of dollars by investing in Berkshire's stock, and I expect Buffett and his future successors to continue to be good stewards of capital. Given that Berkshire now has a market cap of more than $1 trillion market cap, the stock is not going to rise 10-fold overnight or even double. But if we take Berkshire's historical compound annual growth rate (CAGR) of 19.9% and apply it to a $100,000 initial investment, that sum would reach $1 million in about 12 to 13 years. I'll stress that Berkshire's CAGR spans nearly 60 years of performance, so it's no guarantee that the stock will do the same over a shorter period -- it could do better and it could do worse. However, this shows that investing in Berkshire's stock could very well make one a millionaire over time.
