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Berkshire Hathaway's Class A shares ended 2023 with a 15.8% gain. But they underperformed the benchmark S&P 500 stock index, which ended the year up 26.3%, including dividends.

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FRI, DEC 29, 2023

WARREN BUFFETT WATCH

Berkshire's solid 2023 gain isn't enough to beat S&P

Berkshire Hathaway'sClass A shares ended 2023 with a 15.8% gain, notching an eighth straight year of advances. (TheB shares are up 15.5%).

It's the biggest gain since 2021's 29.6% surge and the second largest advance since they rallied by 21.9% in 2017.

But Berkshire underperformed compared to the benchmarkS&P 500 stock index, which ended the year up 26.3%, including dividends.

(The S&P is up 24.2% when dividends are excluded.After nine straight weekly gains, it is just short of its January 2022 all-time high.)

Berkshire's 10.5 percentage point lag versus the S&P gives it a record of six wins and four losses over the past 10 years.

Berkshire's 11.8% compound annual growth rate, however, is just below the S&P's 12.0% CAGR.

Andrew Bary at Barron's writes that Berkshire's recent underperformance is something of a mystery, given what could be a 25% gain to nearly $40 billion for its after-tax operating earnings this year.

He thinks investors could be anticipating Berkshire's return on its cash will be reduced if the Federal Reserve lowers interest rates.

They may also be worried about Warren Buffett turning 93 last summer, with those concerns highlighted by the recent death of Charlie Munger.

Even so,Barron's named Berkshire one of its ten favorite stocks for 2024, citing its "Fort Knox" balance sheet, growing earnings, and a "reasonably priced" stock at "1.4 times estimated year-end 2023 book value and roughly 18 times next year's projected earnings."

It is worth noting, however,that last December Barron's also predicted Berkshire would outperform the market this year, a reminder that picking winners is tricky.

Smaller positions post big gains, but Apple does the heavy lifting

Several of Berkshire's smaller holdings in itspublicly disclosed equity portfolio, the stocks generally chosen by portfolio managers Todd Combs and Ted Weschler, were its biggest percentage winners for the year.

At $1.5 billion, just one of the top six,Amazon.com, has a portfolio value of more than $1 billion based on today's closes.

The other five are below that level: Nu Holdings ($892M),StoneCo ($193M),Lennar ($20M),D.R. Horton ($907M), andFloor & Decor ($533M).

Buffett'sJapanese "trading house" investments are among the biggest gainers for the portfolio's larger year-end positions:Mitsubishi (+58%, $1.9B),Marubeni (+47%, $2.2B),Sumitomo (+40%, $2.2B),Itochu (+39%, $4.8B), andMitsui (+38%, $4.7B).

Berkshire'sApple shares are valued at $176 billion, which is around 48% of the portfolio's total value, so that stock's 48% surge this year generated some big paper profits.

The unweighted average of all the stock moves is an increase of 23.1%.

When weighted by the size of the positions, however, the gain is roughly 28%, with Apple accounting for around 23 percentage points.

Table shows the 2023 percentage moves for all the stocks in Berkshire Hathaway's publicly disclosed equity portfolio as of the most recent filings. Percentages are not adjusted to reflect changes in the number of shares held by Berkshire during the year. (Maybe next year). Liberty Live Class A and B are listed as 0% because they have only traded for a small portion of the year.

Berkshire's 'Squishmallows' make U.S. McDonald's debut

McDonald's is nowoffering Happy Meals with "Squishmallows" toys fromJazwares, which is owned by Berkshire Hathaway.

The fast-food chain launched the partnership on Tuesday. It will continue "for a limited time while supplies last."

McDonald's Grimace is among the twelve characters included in the promotion, along with a "surprise mystery character."

There has been no indication that a Warren Buffett Squishmallow is part of the lineup, although that certainly would be a surprise and mystery for most of McDonald's younger customers.

A Squishmallow depicting Warren Buffett at the 2023 Berkshire Hathaway shareholders meeting. Photo: REUTERS | Rachel Mummey

BUFFETT AND MUNGER AROUND THE INTERNET

Some links may require a subscription

Wall Street Journal on MSN:The Man Preparing for a Berkshire Hathaway Without Warren Buffett

Barron's visual story (subscription):Remembering Berkshire Hathaway's Charlie Munger

Barron's (subscription):Charlie Munger, Close Up

Business Insider:The late Charlie Munger quietly built a $300 million stock portfolio from scratch at a small newspaper publisher. It just warned of worse returns now he's gone.

HIGHLIGHTS FROM THE ARCHIVE

Buffett would bet on monkeys throwing darts to outperform financial advisers (2022)

Buffett and Munger explain why you don’t need to pay anyone for financial advice.

BERKSHIRE STOCK WATCH

BERKSHIRE'S TOP U.S. STOCK HOLDINGS - Dec. 29, 2023

Berkshire's top holdings of disclosed publicly-traded stocks in the U.S., Japan, and Hong Kong, by market value, based on today's closing prices.

Holdings are as of September 30, 2023 as reported in Berkshire Hathaway’s 13F filing on November 14, 2023, except for:

Mitsubishi andMitsui, which are as of June 12, 2023. Tokyo Stock Exchange prices are converted to U.S. dollars from Japanese yen.
Occidental Petroleum, which is as ofDecember 13, 2023.

The full list of holdings and current market values is available from CNBC.com'sBerkshire Hathaway Portfolio Tracker.

QUESTIONS OR COMMENTS

Please send any questions or comments about the newsletter to me at alex.crippen@nbcuni.com. (Sorry, but we don't forward questions or comments to Buffett himself.)

If you aren't already subscribed to this newsletter, you can sign uphere.

Also, Buffett's annual letters to shareholders are highly-recommended reading. There are collectedhere on Berkshire's website.

Best wishes for the new year!

-- Alex Crippen, Editor, Warren Buffett Watch