Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB) has an unmatched history of beating the market over time. From the time Warren Buffett took over as CEO in 1964 through the end of 2025, Berkshire delivered a total return for investors of approximately 6,100,000%. That’s not a typo, and it compares with a return of about 45,000% from the S&P 500.
Warren Buffett himself cautioned investors a few years ago that the long-term returns going forward won’t be anything close to what they’ve been throughout the company’s history. In a nutshell, it’s easier to produce 20% annualized returns when you have a billion dollars to deploy than when you have a trillion dollars.
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However, many investors are skeptical about the ability of Berkshire Hathaway to beat the market at all over the next decade and beyond. And to be fair, there are some legitimate concerns. For one thing, some of Berkshire’s subsidiaries — such as GEICO — have been underperforming their peers in recent years. Also, Berkshire has about $382 billion in cash on its balance sheet, which is about 35% of its total market capitalization. Sure, this cash stockpile earns some income by being invested in Treasuries, but it certainly drags down the company’s overall return profile.
With all of that in mind, I believe there’s still a clear path to Berkshire producing market-beating returns over the next 10-20 years. And here are four things that could put it on the path to getting there.
As mentioned, Berkshire’s insurance business (especially GEICO) has been a bit disappointing in recent years. Profitability isn’t where it should be, and the company is a big laggard in technology, which is a big reason Progressive (NYSE: PGR) recently leapfrogged it for the number two spot in the auto insurance market share.
If new CEO Greg Abel can find ways to put a substantial portion of the company’s cash to work in attractive investment opportunities, it would go a long way to Berkshire producing market-beating returns.
Warren Buffett paused buybacks in his last year or so as CEO, but I’d love to see Greg Abel use them opportunistically, with the same rule Buffett had to follow — buying back at a significant discount to intrinsic value.
Many of the tech-focused investments in Berkshire’s portfolio have been made by people other than Warren Buffett, and this has been a limiting factor.
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