Every year since 1977, Warren Buffett has written an open letter to Berkshire Hathaway (BRK.B) investors. In them, he celebrates successes, takes responsibility for mistakes, and pontificates about what makes some businesses special.
In his 2020 letter, he revealed that Berkshire Hathaway had returned 2,810,526% since he took the helm 55 years ago in 1965. Reflecting on its performance, he revealed that most of Berkshire's value was in four businesses. "All four are jewels."
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In the five years since, Berkshire Hathaway shares have returned another 40%, putting its returns at 5,502,284%. So it would seem that the "jewels" have continued to work their magic. What are they exactly, and can they continue to deliver for Berkshire Hathaway when Buffett steps down in January?
Jewel #1: Apple
With a profit of over $100 billion from Berkshire's $40 billion position in Apple (AAPL +0.17%), you can see why Buffett would call it one of the jewels driving his conglomerate's returns. Yet he has been a seller of the stock since 2023, unloading almost 70% of Berkshire's shares.
Years after calling Apple "probably the best business I know in the world," Buffett explained in 2024 that his selling was for tax reasons.
Despite the selling, Apple remains Berkshire's biggest position, with its $64.8 billion worth of shares making up 20.7% of its holdings as of last quarter.
Jewel #2: Berkshire's property & casualty insurance operation
Berkshire's property & casualty insurance business has a tremendous advantage; when it collects insurance premiums, it can invest them, and keep the returns it gets on other people's money. Being insurance, it has to pay out some claims every year. But in 2020, its war chest of $138 billion in floating capital, or "float" could be invested in stocks or bonds as Buffett chose.
Imagine the privilege of being able to profit from around $100 billion in other people's capital each year (and unlike hedge funds, you keep 100% of the profits, rather than the standard 20% for the industry). That's Berkshire Hathaway's property & casualty business in a nutshell.
By 2025, Berkshire's insurance business had generated $32 billion in after-tax profits from underwriting, and its float had grown to $171 billion. That means that this "jewel" is bigger than ever, as it puts $33 billion more of other people's money to work for Berkshire Hathaway.
Jewel #3: Berkshire Hathaway Energy
Berkshire Hathaway Energy (BHE), which Berkshire controls with its 91% stake, is in Buffett's words, "a very unusual utility business, whose annual earnings have grown from $122 million to $3.4 billion during our 21 years of ownership."
That was in 2020. Last year, BHE generated $3.73 billion in earnings. That roughly 10% increase isn't too impressive for four years, especially given BHE's meteoric earlier growth. Still, that single year's worth of earnings is nearly 3,000% what Berkshire paid for the utility acquisition that became BHE in 1990.
Jewel #4: BNSF Railway
BNSF, America's largest railroad by freight volume, came under Berkshire's umbrella in 2010 when the latter paid around $34 billion for the acquisition. It was a respectable deal, with BNSF having paid Berkshire $41.8 billion in dividends by 2020. BNSF pays out these dividends only after meeting all its business needs and maintaining a balance of $2 billion that lets it borrow at low rates without Berkshire guaranteeing the loans.
Last year, BNSF generated just over $5 billion in earnings, and in 2023, Buffett predicted that, "a century from now, BNSF will continue to be a major asset of the country and of Berkshire. You can count on that."
So, are these "jewels" still delivering for Berkshire?
As you saw, one of the jewels, Apple, was largely sold for a hefty capital gain. Still, Berkshire's remaining 238 million shares generate $62 million in dividends each quarter for Berkshire.
BNSF was never going to home run for Berkshire, because the business is so capital-intensive. Still, it has already paid Berkshire back its initial investment in the form of dividends, with more coming in each year.
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BHE's operating earnings soared by 60% in 2024, while the insurance underwriting business generated $9 billion in operating earnings, almost double from 2023's $5.4 billion total. The float from Berkshire's property & casualty insurance business generated $13.6 billion in operating earnings, also up sharply from the $9.5 billion in 2023.
It seems, then, that the four jewels are still delivering for Berkshire Hathaway. When Buffett steps down as Chairman and CEO in January, it should comfort investors that the four jewels in Berkshire's crown will remain.