In 2024, Berkshire Hathaway defied expectations by surpassing the S&P 500, securing its best performance since 2021. This remarkable outcome, which saw Class A shares increasing by 25.5%, positioned it ahead of the S&P 500’s 23.3% return. It’s worth noting how this achievement is not just a reflection of market conditions but also of strategic decisions made by Warren Buffett and his management team. Surging past the $700,000 mark for its shares, Berkshire Hathaway marked its ninth consecutive year of positive returns, a feat that underscores the resilience and acumen of the conglomerate’s investment strategies.
Buffett’s decision to suspend share buybacks despite rising stock prices raises fascinating questions about the company’s capital allocation strategy. By abstaining from repurchasing shares, which can often be a sign of self-confidence in a company’s future, Berkshire Hathaway instead relied on strong operating earnings. This strategic pivot suggests a focus on long-term growth through robust underlying business performance rather than short-term stock price manipulation. The performance of Geico, its leading auto insurance subsidiary, exemplifies this approach.
Berkshire Hathaway’s insurance operations, particularly Geico, have been critical to its financial resurgence. With an underwriting profit of $5.7 billion in the first three quarters of 2024—significantly up from $2.3 billion in the same timeframe the previous year—Geico’s recovery illustrates the effectiveness of strategic shifts in the insurance sector. Once struggling with an underwriting loss of $1.9 billion in 2022, Geico has returned to its roots and is revitalizing its market position amidst stiff competition from rivals like Progressive.
The implement of telematics has played a crucial role in this turnaround. By adopting data-driven approaches to pricing, Geico is not only enhancing its risk management capabilities but also positioning itself as a more competitive player in an increasingly tech-driven insurance market. This highlights Berkshire Hathaway’s adaptability and willingness to embrace innovation to bolster performance, particularly in sectors that have historically been resistant to change.
Despite the impressive results in 2024, Warren Buffett remains prudent about Berkshire Hathaway’s future. His candid assessments emphasize a tempered approach to expecting continued outperformance. Buffett has stated that due to the vast scale of Berkshire Hathaway, it is inherently challenging for its investments to make substantial impacts. His characterization of expectations beyond “slightly better” performance than average companies as “wishful thinking” reveals a realistic outlook that seeks to temper investor enthusiasm.
The conglomerate’s diverse portfolio, spanning 40 industries and 60 companies, remains a bedrock of its financial strategy. However, Buffett has made it clear that while Berkshire Hathaway is likely to perform better than average U.S. corporations, the extraordinary growth rates of the past may be unsustainable given the company’s maturation and sheer size.
An intriguing dynamic in the 2024 performance narrative is Berkshire Hathaway’s massive cash reserves, which ballooned to $325 billion by the end of September. This capital cushion, nearly doubling from $168 billion in the previous year, has afforded the company unique opportunities to navigate market fluctuations without resorting to aggressive purchasing of stocks or investments. Higher interest rates, while reduced from their peak, continue to provide favorable returns on these reserves, allowing the company to secure income without significant risk exposure.
Buffett’s decision to divest from substantial holdings like Apple and Bank of America—amounting to $133 billion in sales—indicates a calculated strategy aimed at both liquidity enhancement and risk management. While such moves may surprise market analysts, they underline Buffett’s long-standing commitment to adapting to an evolving market landscape.
Berkshire Hathaway’s remarkable performance in 2024, driven by strategic foresight and effective management, illustrates the company’s resilience in a challenging economic environment. While Warren Buffett’s tempered expectations for the future serve as a reminder of the realities that accompany scale and diversification, the conglomerate remains a formidable player in the financial landscape. Its continuing adaptability, particularly through subsidiaries like Geico, alongside its robust cash reserves, positions Berkshire Hathaway not only as a market leader but also as a case study in strategic investment and risk management. Moving forward, investors must balance their expectations, recognizing that while the past showcases unparalleled success, the future will require fresh strategies to navigate an ever-changing marketplace.