Hidden Gem Microcap: Comstock Holding Offers Robust Upside

Warren Buffett discussed Berkshire Hathaway's underperformance compared to the S&P 500 during the 60th annual shareholder meeting on May 3, 2025. Buffett attributed the underperformance to the company's holdings in Coca-Cola (KO), Apple (AAPL), and Wells Fargo (WFC), which have not performed well in recent years. He emphasized the importance of patience and long-term thinking, stating that Berkshire Hathaway's value will be realized over time.

Warren Buffett discussed Berkshire Hathaway's underperformance compared to the S&P 500 during the 60th annual shareholder meeting on May 3, 2025. Buffett attributed the underperformance to the company's holdings in Coca-Cola (KO), Apple (AAPL), and Wells Fargo (WFC), which have not performed well in recent years. He emphasized the importance of patience and long-term thinking, stating that Berkshire Hathaway's value will be realized over time.

Buffett and his team have been net sellers of stocks for 10 consecutive quarters, generating net sales of $174 billion in 30 months. The company sold large fractions of its stakes in Apple and Bank of America, leaving it with an even more massive pile of cash than before. This investment is set to pay out about $13.5 billion to the conglomerate in 2025 [2].

Berkshire Hathaway's underperformance is notable given its historical success. The company's stock has grown at a compound annual rate of about 20% since 1965, when Buffett took control of what was then a failing textile business. In contrast, the S&P 500 has produced compound annual returns of just 10.4% over that time [2].

Buffett's strategy involves determining whether a business is worth more or less than its market price, rather than trying to time the market or predict short-term stock movements. However, in recent times, he has found the pickings quite slim in terms of potential new equity holdings to buy, leading to the company's recent stock sales [2].

Buffett's decision to sell Apple and Bank of America shares is particularly significant. He first purchased shares of Apple in 2016 when it traded for around $25 on a split-adjusted basis. Over the next few years, he built a massive stake in the stock, pouring an estimated $36 billion into it by late 2018. However, by late 2023, the stock had climbed to above 30 times earnings, leading Buffett to start taking some cash off the table [2].

Similarly, Buffett sold a significant stake in Bank of America, reducing his holding by 39%. The sale of these stocks, along with others, has allowed Buffett to pile into a high-yield investment that's paying around 4.3% as of this writing [2].

Buffett's cautious approach to the market is reflected in his recent decisions to reduce exposure to US bank stocks. At the start of 2025, Buffett's Berkshire Hathaway sold about $3.2 billion of shares in American banks and financial companies. Buffett sold about $1 billion stake in Citigroup, ditched shares worth more than $2 billion in Bank of America, and dropped some of its holdings in Capital One [1].

These moves signal a cautious or even bearish outlook on banking, given Buffett's reputation for being preternaturally gifted at foreseeing market trends. However, it's important to note that Berkshire Hathaway still has substantial holdings in the banking sector, with 16.4% invested in American Express and 10.1% in Bank of America [1].

In conclusion, Berkshire Hathaway's recent underperformance relative to the S&P 500 can be attributed to the company's holdings in stocks like Coca-Cola, Apple, and Wells Fargo, which have not performed well in recent years. Buffett's strategy of patiently holding onto undervalued stocks and reducing exposure to riskier assets reflects his long-term perspective. Investors should remain patient and continue to monitor Buffett's decisions as he navigates the ever-changing market landscape.

References:
[1] https://www.telegraph.co.uk/business/2025/07/18/warren-buffett-has-set-alarm-bells-ringing-on-wall-street/
[2] https://finance.yahoo.com/news/warren-buffett-sold-apple-bank-080500592.html