2 reasons to buy Berkshire Hathaway shares like there’s no tomorrow

Most investors know this Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) has been one of the best-performing investments of all time. The key to success has been investing consistently, maintaining it for years or even decades at a time.

But Berkshire’s run is far from over. And now, there are two interesting reasons why almost every investor should consider getting in on this legendary stock.

1. Berkshire has a permanent competitive advantage

Warren Buffett acquired Berkshire Hathaway in 1965. During the first few decades of operation, the company’s value soared. In the 1980s, for example, Berkshire’s stock price rose by at least 30%. majority years, with annual returns reaching 90%.

Although Berkshire’s greatest growth days are behind it, the stock has still performed quite well in more recent decades. Over the past 30 years, for example, Berkshire’s total return has far exceeded that of S&P 500 index. Even over the past three years, Berkshire shares are up about 60%, outperforming the S&P 500’s return of just 38% over the same period.

BRK. Total Return Level B data by YCharts

What allowed Berkshire shares to repeatedly beat the market, even as its valuation soared to nearly $1 trillion? The biggest key has been Buffett’s investing skills. Buffett and his team of investors have repeatedly successfully invested shareholder capital, whether by purchasing shares of a publicly traded company, acquiring a private company, or simply repurchasing shares of Berkshire itself.

But there’s another advantage that Berkshire has that few other investments offer: the advantage of permanent capital. In other words, Berkshire has a pool of capital that it can invest regardless of market conditions. During the 2008 financial crisis, for example, it was able to spend billions of dollars on blue-chip companies at simple discounts because many other competing pools of capital had already run out.

This permanent capital is generated by Berkshire’s insurance business – an industry that doesn’t necessarily see demand drop during recessions or bear markets. Although underwriting profits may not be very high during certain market cycles, insurance companies provide a steady flow of investment money because premiums are paid in advance, while claims are paid after the fact. Many other investment vehicles have copied this business model in recent years, but it has continued to be a lasting competitive advantage for Berkshire, especially when combined with Buffett’s investment acumen.

2. Berkshire makes saving money fun

Diverting more money that could be used for lifestyle expenses into your investment account isn’t always fun, but it’s a wise decision in the long run. Investing in Berkshire can eliminate some of the friction involved in increasing your savings rate.

First, every time you buy more Berkshire shares, you know you’re betting on one of the most successful investment vehicles in history. Putting more money to work in the market is significantly more fun when you have confidence that these investments will match or even beat overall market returns.

Second, when you buy Berkshire shares, you become a partner in one of America’s most iconic companies. You literally become an investing partner with Buffett and the rest of the team. Whenever they make a move, so do you. Except in this case, they’re doing all the groundwork for you while you relax and enjoy life. If they see opportunities in a particular sector or region of the world, Buffett and company will have the power to invest their money where it has the greatest chance of growing. With other investments, your capital may be limited to a certain sector or region.

In short, investing in Berkshire can be more fun than any other investment vehicle. Who wouldn’t want to be Warren Buffett’s investment partner? And any trick you can use to increase your savings rate is almost as important as choosing the right investment. With Berkshire, you can accomplish both, making it an attractive choice for almost all investors.

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*Stock Advisor returns October 14, 2024

Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.