This stock is clearly a favorite of both famous billionaires.
Warren Buffett and Bill Gates have a surprising number of things in common. They both rank among the wealthiest people in the world, of course. 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 especially trounced the market over the long run.
A big winner for both billionaires
Buffett’s Berkshire Hathaway (BRK.A -0.56%) (BRK.B 0.07%) and the Bill & Melinda Gates Foundation Trust have positions in Kraft Heinz. Berkshire’s New England Asset Management subsidiary also owns shares of Crown Castle, Microsoft, and Walmart, all of which are in the Gates Foundation Trust’s portfolio.
However, the primary stock Buffett and Gates have in common 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 charitable organization’s second-largest holding.
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 share price skyrocketed 4,384,748%. This staggering gain was more than 140 times the total return of the S&P 500 with dividends included. Berkshire has also performed well so far in 2024, with a double-digit percentage gain.
Gates hasn’t owned Berkshire Hathaway stock nearly as long as Buffett has. However, since his foundation first purchased shares of Buffett’s company in the second quarter of 2010, Berkshire stock has more than quintupled in value.
Why Berkshire Hathaway could continue to soar
Buffett’s investing strategy that led to Berkshire’s phenomenal success through the years could keep the momentum going. The legendary investor picks businesses instead of stocks. And he only invests in businesses that trade for a reasonable valuation relative to their likely long-term earnings growth.
Although Buffett once said that diversification “makes little sense if you know what you are doing,” Berkshire has a diversified portfolio. The company owns over 40 stocks across multiple industries.
Berkshire’s cash stockpile totaled more than $167.6 billion at the end of 2023. When stock valuations become more attractive, look for Buffett to put that cash to use scooping up shares of well-run companies — positioning his company for strong growth when the market rebounds.
While many investors (including yours truly) 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 well diversified on this front, with dozens of subsidiaries operating in various sectors.
A few potential issues
Even the greatest stocks have some baggage. Two of Berkshire’s potential issues relate to Buffett.
One is that his relatively conservative investing style could cause the stock to underperform. Buffett has famously avoided buying stocks outside of his wheelhouse, which has caused him to miss out on opportunities at times (especially with promising tech stocks).
Another is that Buffett and Berkshire have become practically synonymous. Should the 93-year-old billionaire experience health issues, Berkshire’s share price could fall.
However, I’m not overly concerned about either issue. Berkshire’s stock performance hasn’t suffered noticeably because Buffett didn’t buy some great stocks early on. Buffett has already handed over some of the investing duties to two capable lieutenants. Berkshire’s succession plan is for Greg Abel, who currently serves as Vice Chairman of Non-Insurance Operations, to become CEO when Buffett steps down.
Berkshire Hathaway will be in good hands whenever the day arrives when Buffett can no longer lead the company. In the meantime (and I hope it’s a long meantime), Berkshire should keep on making money for Buffett, Gates, and many other investors who aren’t billionaires.
Keith Speights has positions in Berkshire Hathaway and Microsoft. The Motley Fool has 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 on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
