Simply copying Berkshire’s latest moves isn’t necessarily a great idea for investors.
Warren Buffett has done a fantastic job of outperforming the markets over not just years but decades. His company, Berkshire Hathaway (BRK.A 0.12%) (BRK.B -0.33%), has averaged annual returns of around 20% going back to 1965. The S&P 500, by comparison, has averaged returns of just over 10% during that time frame.
Many investors copy Buffett’s moves in the hopes that they may be able to generate similar returns and also outperform the market. But what may surprise you is that, of the top seven stocks in Berkshire’s portfolio, only one of them has definitively been a market-beating investment over the past five years.
Many of Berkshire’s stocks have been nowhere near beating the market in recent years
Over the past five years, the S&P 500 has risen by 86%. But of Buffett’s top holdings, only two have generated better returns than that, and only one has proven to be vastly superior to investing in the broad index.
The top seven stocks in Berkshire’s portfolio are Apple, Bank of America, American Express, Coca-Cola, Chevron, Occidental Petroleum, and Kraft Heinz. They all account for at least 2% of the fund’s overall holdings and they combine for approximately 81% of the total weight. Here’s how they’ve done compared to the S&P 500.
Buffett’s top stocks versus the S&P 500.
Both Apple and American Express have performed better than the index, but the latter’s return is only a few points better while the former has clearly proven to be a superior investment over this time frame. Buffett has long admired Apple, once calling it “probably the best business I know in the world.” With a solid following of fans and terrific margins, it’s one of the best stocks to own for the long haul.
Berkshire’s moves may not reflect all the decisions Buffett would make
When the latest 13f filings come out, Buffett fans are eager to see which stocks Berkshire bought and sold. And sometimes, that can lead to an influx of volatility for those stocks. If Berkshire bought it, that can lead to more investors also jumping on the bandwagon, sending the stock higher. After all, what could be better than a vote of confidence from one of the world’s richest people and arguably the best investor ever?
But there are other managers making investment decisions for Berkshire besides Buffett. And Buffett can’t invest in every stock he may want to hold in Berkshire’s portfolio. For example, his personal relationship with Microsoft co-founder Bill Gates is the main reason he doesn’t invest in the tech giant, despite it being a solid Buffett-type stock to own. And Berkshire’s public holdings also don’t factor in other investments Buffett may have, including in businesses that are privately held.
Investors shouldn’t simply try to copy the same moves Berkshire makes
Trying to copy all of Berkshire’s moves doesn’t mean that you’ll end up with the same results as Buffett. And by the time the filings come out, the stocks may have moved in different directions, affecting your overall returns.
The good news is that in many cases, you can do better than Berkshire by focusing on growth stocks and investments Buffett may not be familiar with or investing in, such as businesses that are involved with artificial intelligence. Buffett normally avoids businesses that are too complex, and if you do the same, you can miss out on promising growth stocks that possess a lot of upside.
While Buffett’s portfolio may contain many solid blue chip stocks, they haven’t all been great investments over the years. If you want to beat the market and generate some great returns, simply copying Berkshire’s latest moves isn’t a guaranteed path to success.
American Express is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, Chevron, and Microsoft. The Motley Fool recommends Kraft Heinz and Occidental Petroleum and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.