Is Berkshire Hathaway Inc. (BRK.B) Stock A Better Investment Than S&P 500 ETF?

Warren Buffett-led Berkshire Hathaway Inc. (NYSE:BRK.B) stock could provide similar diversification as S&P 500 ETF with even better results.

– Berkshire Hathaway, led by the legendary investor Warren Buffett, has outperformed the market for many years.

– Berkshire can continue to beat the market due to its consistent method of smart stock picking and buying assets based on value parameters.

– Investing in BRK.B stock could achieve the same purpose of diversification as investing in the SPY ETF with even better results.

Many investors prefer a diversified low-risk portfolio over the riskier strategy of stock-picking. The SPDR S&P 500 ETF Trust (NYSEMKT:SPY) is very popular for this purpose since it follows the S&P 500 index of 500 large cap companies listed on the NYSE or NASDAQ. However, in my opinion, investing in Berkshire Hathaway Inc. (NYSE:BRK.B) stock could achieve the same purpose of diversification with even better results.

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Berkshire Hathaway, led by the legendary investor Warren Buffett, has outperformed the market for many years. In the last five years, BRK.B’s stock has increased 116.7% while the SPY ETF has gained 79.7%. What’s more, in four of the last five years Berkshire stock has outperformed the SPY ETF, as shown in the chart below.

* 2016 until December 23, 2016

According to Berkshire Hathaway’s 13-F filing on November 14, 2016, its holdings as of September 30, 2016, consisted of 48 different public companies. However, the 20 companies with the highest holdings by Berkshire accounted for 93.3% of the total public holdings. The table below shows the list of 20 companies and their price change in 2016 (until December 23), the number of shares holdings, holding value and Berkshire’s stake in the companies.

Also read: Is Warren Buffett Led Berkshire Hathaway Inc. Headed For A Big 2017?

The average price gain of 13.3% for the 20 companies in 2016 was much less than the 25.2% appreciation in BRK.B stock in the same period. As such, an investor who was trying to copy Berkshire’s holdings by investing in the same stocks would fail to achieve the results of BRK.B stock. Investors should bear in mind that apart from Berkshire’s holdings in public companies it has large assets in very successful private subsidiaries where in most of them the company has a 100% ownership. The list of the private holdings includes BNSF, Duracell, GEICO, General Re, Forest River, Precision Castparts, Russell Brands, IMC International Metalworking Companies and many others.