How Berkshire Hathaway's Four Core Holdings Drive Over 5.5 Million Percent Returns

When Warren Buffett took control of Berkshire Hathaway in 1965, few could have predicted that the conglomerate would compound returns to 5,502,284% by 2025. In his 2020 shareholder letter—a document that stands alongside his timeless investing principles—Buffett identified four specific businesses as the primary engines behind this extraordinary wealth creation. Understanding these “jewels” reveals why Berkshire continues to thrive despite leadership transitions.

The Architecture of Berkshire’s Success: Four Unlikely Partners

What makes Berkshire’s portfolio unusual isn’t diversity for diversity’s sake, but rather the synergy between seemingly unrelated sectors. Across technology, insurance, energy, and transportation, these four holdings have compounded wealth while presenting vastly different risk profiles and capital requirements.

Apple: The Technology Cornerstone ($64.8 Billion Position)

Berkshire’s largest single investment generates over $100 billion in cumulative profits from its $40 billion initial stake. Though Buffett—who has authored principles on business quality—began systematically reducing Apple holdings in 2023 (offloading nearly 70% of shares), the remaining 238 million shares still deliver $62 million quarterly in dividends.

This apparent contradiction reflects sophisticated tax optimization rather than loss of confidence. Apple remains Berkshire’s 20.7% portfolio weight, demonstrating that even partial positions in exceptional businesses warrant retention. The stock’s resilience underscores why Buffett has called it “probably the best business I know in the world.”

Insurance Float: The Permanent Capital Advantage ($171 Billion Float)

Berkshire’s property and casualty insurance operation functions fundamentally differently from typical financial businesses. The mechanism is elegant: collect premiums upfront, deploy them across markets, retain investment profits entirely (unlike hedge funds’ 20% fee structure).

By 2025, this float had expanded to $171 billion—$33 billion more than the 2020 baseline of $138 billion. The after-tax underwriting profits reached $32 billion cumulatively, while float-derived earnings hit $13.6 billion in 2024 alone, nearly double the prior year’s $9.5 billion. This engine generates returns on capital controlled but not legally owned—a perpetual advantage few businesses possess.

Berkshire Hathaway Energy: Steady Utility Economics ($3.73 Billion Annual Earnings)

Through its 91% stake, Berkshire oversees a utility unconventional by industry standards. BHE’s earnings trajectory—from $122 million during acquisition to $3.73 billion presently—represents a 30-fold increase over two decades. While recent years show deceleration (roughly 10% four-year growth), this reflects the law of large numbers rather than operational decline.

Last year’s performance marked a 60% operating earnings surge, signaling renewed momentum. Critically, BHE’s single year of earnings now represents 3,000% of what Berkshire paid for the entire 1990 acquisition, validating the original thesis that patient capital in quality infrastructure assets compounds reliably.

BNSF Railway: Transportation’s Compounding Machine ($5+ Billion Annual Earnings)

America’s largest freight railroad proved neither flashy nor capital-light—exactly what Buffett anticipated at the 2010 acquisition price of $34 billion. BNSF’s dividend payouts by 2020 had already exceeded the purchase price, creating a self-perpetuating return stream.

Last year, BNSF generated just over $5 billion in earnings while maintaining its disciplined capital structure: paying dividends only after operational needs are met and preserving a $2 billion balance sheet buffer that enables low-cost borrowing independent of Berkshire’s guarantee. Buffett’s 2023 prediction stands: “A century from now, BNSF will continue to be a major asset.”

Sustained Delivery: Do the Jewels Still Shine?

Over five years, Berkshire shares returned 40% despite Apple reduction. The insurance operation’s 2024 underwriting earnings jumped to $9 billion from $5.4 billion in 2023—a 66% increase that validates the float thesis at scale. BHE’s 60% operating earnings growth signals infrastructure assets’ resilience during rising rate environments.

BNSF, while capital-intensive and slower-growth, has already returned its entire initial investment through dividends alone. The business generates perpetual cash flows supporting Berkshire’s annual distributions and reinvestment flexibility.

The four-part structure ensures Berkshire doesn’t depend on any single sector’s performance. Technology volatility, insurance policy cycles, regulatory utility dynamics, and freight demand patterns operate independently, yet collectively they’ve compound into unmatched wealth creation.

Leadership Transition and Investor Reassurance

When Warren Buffett transitions from Chairman and CEO in January, shareholders should recognize that institutional strength resides not in individual decision-making but in these four diversified, established engines. Each generates recurring earnings, requires minimal founder involvement to execute strategy, and has demonstrated resilience across decades.

The principles outlined in Buffett’s various shareholder communications—patience, quality focus, and countercyclical thinking—remain embedded in these businesses’ operational DNA. Succession planning for Berkshire isn’t about replacing Buffett’s judgment; it’s about allowing proven assets to compound undisturbed under capable stewardship.

These four jewels represent the mathematical foundation of Berkshire’s 5.5-million-percent return journey. Their continued performance will define whether this track record extends into the next era.