Key Points
With dividends, the S&P 500 has had six calendar-year losses since 2000.
Berkshire's stock beat the index in all those years and gained in four of them.
But Berkshire's Class A shares dropped around 51% between September 2008 and March 2009.
Counting dividends, the S&P 500 (SNPINDEX:^GSPC) has been down in six calendar years since 2000. Berkshire Hathaway (NYSE:BRKA)(NYSE:BRKB) stock beat the index in all of them.
The record is from Berkshire's own annual letter, which has a table comparing the yearly change in its per-share market value to the S&P 500's return, including dividends.
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In 2000, Berkshire's stock rose 26.6% but the index slid 9.1%. It added 6.5% in 2001 versus an 11.9% decline, and it dipped just 3.8% in 2002, as the index shed 22.1%. In 2008, the stock fell 31.8%, a little less than the index's 37% drop. And in 2018 and 2022, Berkshire climbed 2.8% and 4% but the index fell 4.4% and 18.1%.
So, Berkshire made money in four of those six years. On a simple average, the stock gained less than 1% a year over all six, while the index dropped around 17%.
Of course, the definition matters here. A down year in this case follows the table's S&P column, which counts dividends. Berkshire hasn't paid a dividend since 1967, so its column is just the change in the stock's market value.
On price alone, two more years would make the list. The index ended 2011 a fraction of a point down and dropped 0.7% in 2015. And Berkshire's shares slid both years, by 4.7% and 12.5%, so the streak arguably depends on where the line gets drawn.
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Buffett promised cash, not a steady stock
Warren Buffett wrote about keeping Berkshire liquid for decades, and he stuck to it in 2008, the worst of those six years for the market. That year, Berkshire put $14.5 billion into high-yielding fixed-income securities from three companies, getting an equity stake in each deal as a bonus. To pay for them, Buffett trimmed some stock holdings he would've preferred to keep.
In his 2008 letter to shareholders, he said that he'd pledged to always run Berkshire "with more than ample cash."
"We never want to count on the kindness of strangers in order to meet tomorrow's obligations," Buffett wrote.
But that pledge was about the company, not the share price. Berkshire's stock still lost 31.8% in 2008. And the calendar-year number hides the worst of it. In his 2017 letter, Buffett listed the stock's largest drops, including a 50.7% slide in the Class A shares between Sept. 19, 2008, and March 5, 2009.
He never said the stock was immune, either. In his 2014 letter, Buffett noted that Berkshire's shares had fallen around 50% from a peak three times since 1965.
"Someday, something close to this kind of drop will happen again, and no one knows when," he wrote.
The 2000 gain started from a low price
I'd say the record's best run also owes something to where the stock started. According to the same 2017 letter, Berkshire's Class A shares slid 48.9% between June 1998 and March 2000, bottoming at $41,300. That was only about 9% over the $37,987 in book value per share Berkshire reported for the end of 1999 (book value is what's left after subtracting a company's liabilities from its assets).
Notably, Berkshire's edge was narrowest in 2008, at about 5 percentage points, the year the market's drop was largest. In the other five down years, the margin ranged from around 7 points in 2018 to about 36 points in 2000.
What does the record promise now?
Berkshire's Class B shares closed at around $542 on Oct. 29, under 2% off their 52-week high of $549.96. With book value of around $348 per Class B share at the end of June, the stock trades at about 1.6 times book value -- well over the roughly 1.1 times book value it hit in March 2000.
The cash, of course, is still there. Greg Abel, Berkshire's CEO since January, described a "fortress-like balance sheet" in his first annual letter. And Berkshire had around $365 billion in cash and Treasury bills at the end of June, or about 31% of its market value at the Oct. 29 close. Some of that money is needed to back Berkshire's insurance business, Abel said.
Still, can investors count on Berkshire in the next down year? I think the record makes a decent case that the stock could hold up better than the index again. But it doesn't promise a gain, and the shares aren't starting from anywhere near their March 2000 valuation.
For me, that still makes Berkshire worth owning as a steadier part of a portfolio. I'd just expect its edge in the next down year to be narrower than it was in 2000.
Daniel Sparks and his clients have positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.