The Stock Warren Buffett Believes Will Outperform the S&P 500 with Lower Risk

Warren Buffett, the legendary investor and CEO of Berkshire Hathaway, has a track record that speaks for itself. Since taking control of the business in 1965, Buffett has consistently outperformed the S&P 500, with Berkshire Hathaway’s compound annual return standing at an impressive 19.8% compared to the S&P 500’s 10.2%.

Buffett’s investment strategy of focusing on great companies trading at fair prices has proven to be successful through various market conditions. In his most recent letter to shareholders, Buffett highlighted one company that he believes should outperform the market averages going forward – Berkshire Hathaway itself.

With a portfolio of equity investments, an insurance business, railroads, utility and energy businesses, and other operations, Buffett sees Berkshire Hathaway as a solid investment. Despite its massive size, Buffett believes that Berkshire should operate with less risk of permanent loss of capital compared to the average American corporation.

Buffett’s confidence in Berkshire Hathaway is evident not just in his words, but also in his actions. Approximately 99% of his wealth is tied to the company, and he has been actively buying back shares of Berkshire Hathaway, totaling $74 billion since mid-2018.

Despite Buffett’s belief that Berkshire Hathaway should outperform the average corporation, the stock trades at a relatively low forward price-to-earnings ratio of 17.7x. With a substantial cash position and ongoing share buybacks, Berkshire Hathaway presents itself as a compelling investment opportunity.

Investors looking to follow in Buffett’s footsteps may want to consider the potential of Berkshire Hathaway as a long-term investment. While past performance is not indicative of future results, Buffett’s track record and commitment to the company suggest that Berkshire Hathaway could continue to deliver solid returns for shareholders.