Why Berkshire Hathaway is partly to blame for the S&P 500 being in the red this year

July 10, 2020, 12:00 PM UTC

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For more than two years, Apple stock has been the largest holding in Warren Buffett’s Berkshire Hathaway portfolio, roughly doubling in value over that time. The coronavirus pandemic has tipped the scales further: Apple now accounts for nearly 44% of Buffett’s roughly $214.5 billion in stocks, based on the investor’s most recent disclosures—including his announcement that he sold out of airline stocks in April.

Of course, while the heavy concentration in Apple has, as some observers have pointed out, left the Oracle of Omaha’s portfolio lopsided and less than diversified, that’s as much a reflection of how well Apple stock has performed this year—up some 30% year to date—as it is of how poorly Buffett’s other holdings have done.

Indeed, Buffett’s second-largest holding, Bank of America stock, has plunged 34% so far this year; his next largest, Coca-Cola, has fallen 19%; after that, American Express is down 25%.

Even doubling down on Apple wasn’t enough for Buffett to make up for those dismal returns: In a year in which the S&P 500 is down less than 2% so far, the stocks Buffett owns have fallen an average of nearly 12%. The only stock that did better than Apple in Berkshire’s holdings is Amazon, up almost 67%—but Buffett’s stake in the company, worth $1.6 billion, makes it a tiny holding next to Apple, of which the investor owns $93.5 billion in shares.

Holding those cards, Berkshire Hathaway stock itself has underperformed many of the companies in its own portfolio, as well as the broader market. Berkshire shares have fallen 20% year to date.

Though Buffett is known for his investing prowess, it’s likely many average investors’ returns have easily outperformed his—even if they don’t have nearly half of their money invested in Apple.

Apple has become such a juggernaut, with a $1.66 trillion market cap that makes it the most valuable company in the world, that it dominates every major U.S. stock index and many broad-based mutual funds. Apple accounts for nearly 6% of the value of the S&P 500—a weighting that has helped buoy investors’ returns amid spiking market volatility.

It’s not just Apple, either: The other big four tech companies at the top of the S&P 500—Microsoft, Amazon, Alphabet, and Facebook—have gained significantly in 2020, helping to power the stock index’s comeback from a bear market in March.

Meanwhile, Buffett’s light helping of tech stocks besides Apple has hurt his relative performance compared to the broader market, as tech companies have continued surging this year while other industries faltered. Ultimately, investors would have been better off putting their money in an S&P 500 exchange-traded fund (ETF)—or just Apple stock itself—than they would have been by investing in Berkshire Hathaway.

And here’s an odd twist: Buffett’s own portfolio has been dragging down the broader market. After the five big tech stocks, Buffett’s company, Berkshire Hathaway, is the sixth-biggest constituent in the S&P 500, right after Facebook. Together, those six companies make up a quarter—or 25%—of the total index. Without Berkshire, the S&P 500 might be closer to positive territory by now.

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