Monday, June 17, 2024

Warren Buffett’s Berkshire Hathaway Falls Behind Tech Stocks Over Last 20 Years

Comparison of Berkshire Hathaway and US Tech Stock Performance Over 20 Years

The Power of Tech: Comparing Berkshire Hathaway’s Performance Against US Tech Over the Last 20 Years

If you had invested $10,000 in Berkshire Hathaway stock 20 years ago, you would now have about $65,300. However, if you had put that same $10,000 in the Nasdaq, you would have a remarkable $110,700 today.

This revelation comes from an analysis by Jessica Rabe at market research firm DataTrek, who posed a thought-provoking question: “Would you rather have Warren Buffett manage your money or put it to work in a broad basket of US public technology companies?”

Although the comparison is not exactly apples to apples, as Berkshire’s stock price reflects earnings from all its businesses like Geico and BNSF Railway, the analysis still sheds light on the company’s performance in comparison to tech benchmarks.

According to DataTrek, QQQ (Nasdaq index tracker) and XLX (S&P 500 tech ETF) have outperformed Berkshire stock by 454 and 280 percentage points, respectively, over the last two decades. This trend continues over the past 5, 10, and 15 years as well.

Tech’s long-term performance underscores the power of disruptive innovation, as companies in the tech sector leverage cutting-edge developments to drive significant returns. While Berkshire has had its moments of outperforming the US tech sector during certain market conditions, the overall trend favors tech investments.

Companies in tech ETFs like QQQ and XLX focus on disruptive innovation, while Berkshire tends to allocate capital to more traditional industries. The engineering and tech expertise of tech companies contribute to their ability to capitalize on new trends like gen AI.

Tech stocks, including giants like Nvidia, Apple, and Microsoft, have been instrumental in driving market returns this year, outperforming both Berkshire and the broader S&P 500 index. Despite Berkshire’s occasional outperformance during specific market conditions, the overall trend suggests that tech investments have delivered more robust returns over the years.

The analysis by DataTrek highlights the importance of staying attuned to disruptive innovation and technological advancements in the ever-evolving market landscape, showcasing the enduring power of tech investments.

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