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In this year’s turbulent market, there haven’t been many places to hide.
But Berkshire Hathaway BRK.B, which could be considered a quasi-mutual fund because of its extensive equity portfolio, has been holding its own. As shown in the chart below, Berkshire shares gained 17.3% in 2025 through April 24, compared with a loss of 6.4% for Vanguard 500 Index VFINX, a proxy for the overall equity market.
2025 Performance: Berkshire Hathaway versus Vanguard 500 Index
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There are three main reasons Berkshire has excelled.
Reason Number 1: Berkshire’s equity holdings don’t mirror the market, which has been a good thing.
Berkshire’s investment portfolio has partly benefited from its lack of exposure to some larger stocks that have suffered double-digit losses. The table below shows the largest holdings in Vanguard Index 500 compared with their weightings in Berkshire Hathaway’s investment portfolio. Although Berkshire has been trimming its exposure to Apple AAPL over the past year, that stock still consumed a hefty chunk of its equity holdings as of March 31, 2025. The stock declined about 17% for the year to date through April 24, 2025, on worries that tariffs could dent the company’s profitability. However, Berkshire was not exposed to losses on some other major holdings in the market index, such as Microsoft MSFT, Nvidia NVDA, and Meta Platforms META.
Top 15 Holdings: Vanguard Index 500
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At the same time, Berkshire has benefited from several of the equity investments it does own. As noted above, its large stake in Apple has been a negative, but other large holdings such as Coca-Cola KO, Chevron CVX, and Kraft Heinz KHC have held up better.
Top 15 Holdings: Berkshire Hathaway
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Reason Number 2: Berkshire still has a significant cash cushion.
The firm typically holds ample cash reserves and entered 2025 with an even more defensive position than usual. Cash and cash equivalents (securities with maturity dates of one year or less) totaled about $321 billion at the end of 2024. These holdings have helped buffer some of the risk of its equity investments.
Reason Number 3: Berkshire’s operating business has been relatively resilient.
In addition to its cash and publicly traded equity holdings, the company runs a wide range of operating businesses. These include extensive insurance operations, which account for close to half of operating earnings, as well as other lines of business, including manufacturing, energy/utilities, and railroads. Although Morningstar strategist Greggory Warren believes it will be increasingly difficult for Berkshire to generate outsize returns because of its size and growing capital base, it has historically excelled at producing returns above its cost of capital. And while some of Berkshire’s business lines would be vulnerable to an economic downturn, the diversified nature of its business operations has generally been a positive.
Past Performance
This isn’t the first time Berkshire Hathaway has diverged from overall market trends. Although the stock’s correlation with the overall equity market has trended up somewhat over time (from less than 0.50 in the early 1980s to about 0.70 for the most recent trailing three-year period), that number is still quite low. In fact, Berkshire’s three-year correlation with the overall equity market is lower than those of the market benchmarks for international stocks (0.81) and small-cap stocks (0.92). What that means is that it’s much less tied to overall market trends than investors might expect.
Correlation Trend: Berkshire Hathaway vs. Vanguard 500 Index
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Moreover, Berkshire Hathaway has often (though not always) held up better than average during market drawdowns. As shown in the chart below, the firm’s shares actually rose during the tech-stock meltdown that started in early 2000. The stock also held up well in 2022 thanks to its energy operations, cash reserves, and emphasis on lower-risk business lines such as insurance and consumer staples.
Cumulative Returns (%) During Market Drawdowns
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Conclusion
Does this mean every investor should own shares in Berkshire Hathaway? No. Thanks in part to its strong performance this year, the stock currently trades at a 9% premium to our fair value estimate, a level we consider modestly overvalued. But as this year’s performance indicates, it can be a useful complement to a passive equity portfolio.
The author or authors do own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
