** This article is not advice to invest in the following companies, it's just factual info based on historical performance which is not a reliable indicator of future performance **
2020 was a tough year for investors even for Warren Buffett himself. Generating returns in a recession and a Global pandemic on top of that proved difficult.
Many people switched investment options inside their portfolios to less aggressive holdings which further solidified losses and any chance of recovery.
Regarding Warren Buffett, the share price of his Berkshire Hathaway (BRBK.B) investment company returned just 2.5 per cent, lagging major US benchmarks like the S&P 500.
The top holding was in fact Apple which has a stellar year.
So what worked in 2020 for Buffets portfolio
- Apple and Amazon (AMZN), whose shares were 70 per cent higher at the end of the year.
- The standout performer in 2020 was new holding Snowflake, which floated in September at $120 and closed the year 134 per cent higher at $281. This is interesting as Buffet normally shys away from Initial Public Offerings.
Biggest Changes in 2020
- Healthcare was one of the biggest booms in 2020, which is no surprise that his holdings did quite well.
- In the third quarter of 2020, the portfolio added to positions in Abbvie (ABBV), Merck (MRK) and Bristol Myers Squibb (BMY) - the trio now account for 2.4 per cent of the portfolio’s assets between them.
- Of these holdings Abbvie posted a positive return for the year, up 20 per cent.
Below you can see what the Portfolio looked like as of the 31/12/2020 with data capture to the end of the December quarter
The Losses
- Berkshire Hathaway Energy and its railway subsidiary BNSF, for example, were hit hard in 2020. The manufacturing, services and retail (MSR) arm, with holdings in metalworking companies and aircraft parts suppliers, has also been damaged by the pandemic.
- And exposure to insurance has weighed on performance, with much higher payouts last year in the industry as a whole.
Our Take
Having a 50% holding in Apple, could be the only reason why the portfolio had a positive return as the 78.44% gain from last year combined with the dividends paid out made a generous return considering the current economic situation. Berkshire is not easily compared with an index or a conventional investment fund. But what we do know is that value investing is making a tentative comeback and the real economy recovering, these conditions couldn't be more favourable to Buffett’s approach of buying unloved stocks.