Warren Buffett and Bill Gates have a surprising number of things in common. They are, of course, both among the richest people in the world. Each man has given significantly to charity. Both play bridge (often against each other). Buffett and Gates also read a lot.
They even invest in some of the same stocks. One stock owned by both Buffett and Gates has mostly beaten the market over the long term.
A big winner for both billionaires
Buffetts Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) and the Bill & Melinda Gates Foundation Trust have positions in it Kraft Heinz. Berkshire’s subsidiary New England Asset Management also owns shares of Crown Castle, MicrosoftAnd Walmartall of which are in the portfolio of the Gates Foundation Trust.
The most important stock that Buffett and Gates have in common, however, is Berkshire Hathaway itself. Most of Buffett’s fortune is invested in Berkshire. The conglomerate makes up 16.8% of the Gates Foundation Trust’s portfolio, making it the charity’s second-largest holding company.
Berkshire has been a big winner for both billionaires. Between 1965 (when Buffett took control of the company) and the end of 2023, Berkshire’s stock price shot up 4,384,748%. This staggering profit was more than 140 times the total return of the S&P500 including dividends. Berkshire has also performed well so far in 2024, with double-digit percentage gains.
Gates has not owned shares of Berkshire Hathaway for as long as Buffett has. However, since his foundation first bought shares of Buffett’s company in the second quarter of 2010, Berkshire’s shares have increased in value more than fivefold.
Why Berkshire Hathaway could keep rising
Buffett’s investment strategy, which has led to Berkshire’s phenomenal success over the years, could keep the momentum going. The legendary investor chooses companies instead of stocks. And he only invests in companies that trade at a reasonable valuation relative to their likely long-term earnings growth.
Although Buffett once said that diversification “doesn’t make much sense if you know what you’re doing,” Berkshire has a diversified portfolio. The company owns more than 40 stocks across multiple industries.
Berkshire’s cash hoard totaled more than $167.6 billion at the end of 2023. As stock valuations become more attractive, expect Buffett to use that money to snap up shares of well-managed companies – positioning his company for strong growth when the market recovers. .
While many investors (including yours truly) often focus primarily on Berkshire’s investments, it’s also important to remember that the company’s internal operations have solid growth prospects. Berkshire is also well diversified in this area, with dozens of subsidiaries operating in different sectors.
A few potential problems
Even the biggest stocks have some baggage. Two of Berkshire’s potential problems involve Buffett.
One is that his relatively conservative investment style could cause the stock to underperform. Buffett has famously avoided buying stocks outside his wheelhouse, sometimes missing opportunities (particularly in promising technology stocks).
Another is that Buffett and Berkshire have become virtually synonymous. If the 93-year-old billionaire develops health problems, Berkshire’s stock price could fall.
However, I am not too concerned about either issue. Berkshire’s stock performance hasn’t suffered noticeably because Buffett didn’t buy some great stocks early. Buffett has already handed over some of the investing duties to two capable lieutenants. Berkshire’s succession plan is for Greg Abel, who is currently vice chairman of Non-Insurance Operations, to become CEO when Buffett steps down.
Berkshire Hathaway will be in good hands when the day comes when Buffett can no longer run the company. In the meantime (and I hope it lasts a long time), Berkshire needs to keep making money for Buffett, Gates, and many other non-billionaire investors.
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Keith Speights holds positions at Berkshire Hathaway and Microsoft. The Motley Fool holds positions in and recommends Berkshire Hathaway, Crown Castle, Microsoft and Walmart. The Motley Fool recommends Kraft Heinz and recommends the following options: long January 2026 $395 calls at Microsoft and short January 2026 $405 calls at Microsoft. The Motley Fool has a disclosure policy.
Billionaires Bill Gates and Warren Buffett Both Own This Stock — and It’s Beat the S&P 500 Over the Long Run was originally published by The Motley Fool
