In his recent Indexology Blog post, S&P Dow Jones’ Craig Lazzara pointed to Berkshire Hathaway’s waning supremacy over the large-cap S&P 500 index. Once capable of outperforming the index, the stock has recently put together a string of comparatively pedestrian years as its performance has become more tied to the market. The volatility of Berkshire, helmed by super investor Warren Buffett, however, has been far more in line with the index, particularly when compared with another index heavyweight, Apple Inc.
Since 2000, Berkshire Hathway’s weighting in the index hasn’t varied much between 1% and 2%, with an average contribution to the annual index return of about 4 basis points; Apple has contributed an average 26 basis points over the same period.
Berkshire’s diversification benefits have also declined recently as its correlation to the index rose above 0.6 in mid-2013 and has remained high since then. The firm’s correlation to the index notably fell in previous rough patches for the index in the early 2000s and during the global financial crisis; however, it remained high in early 2016 and late 2018 during those market drops.