How Much Better Has Buffett Performed than the S&P 500?

Warren Buffett has been lauded as the world’s greatest investor. He seems to have this almost uncanny knack for picking stocks and despite the fact that he asserts no one can predict the stock market, he has a ridiculous record for doing better handpicking stocks than anyone else. In fact, his stock Berkshire Hathaway has beaten the S&P 500 pretty consistently since Buffett took over in 1965.

Berkshire’s success can be chalked up to a number of things, including the company’s constant growth through purchases, the growth due to bolt-on acquisitions, and increased value through subsidies. In the 52 years that Buffett has been at the helm of Berkshire Hathaway, the company’s per-share book value has only declined twice. 

What does that mean?

Buffett’s company has consistently shown growth and, over the years, generated 155 times the total return of the S&P 500, even when including the S&P 500’s stock dividends. The company has enjoyed 50 years of growth, even considering the economic downturns of the 80s and mid 2000s, which is not something most companies can say.

That means that if 52 years ago you had invested $10,000 in the S&P 500, your money would be worth around $1.28 million. That sounds like a lot until you compare it to Berkshire. If you had invested the same amount in Berkshire 52 years ago, you’d have more than $197 million. That’s the power of compounding interest, and one of the reasons that Buffett is the second wealthiest man in the world.

So it might seem odd to call Buffett the Oracle of Omaha, but when it comes to stocks he certainly seems to have some sort of crystal ball to help him decide what moves to make. Or, at the very least, a much more analytical mind than the rest of us.

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