SG 50 Versus Berkshire Hathaway 50

2015 marks the 50th year since Singapore became independent in 1965. It has been a remarkable journey.

From a standing start as a tiny island nation without any natural resources and some less-than-friendly neighbours, Singapore has grown to become the most advanced nation in Southeast Asia. Financially, Singapore has been one of the fastest-growing economies in the region over the past 50 years and today, it holds the highest GDP per capita amongst its SEA neighbours.

Interestingly, 1965 was also the year when Warren Buffett took control of his now sprawling business empire Berkshire Hathaway. As such, this year also marks the 50th anniversary of Buffett’s leadership of Berkshire.

Currently, the company is perhaps most well-known for being the fourth largest firm in the U.S. with a market capitalisation of US$362.2 billion (roughly S$490 billion). For some perspective, the collective market cap of the 30 companies which make up Singapore’s market barometer, the Straits Times Index (SGX: ^STI), is S$531 billion.

For some fun

In the spirit of Foolish fun, if we compare the history of Singapore and Berkshire Hathaway, which has actually grown faster over the past 50 years?

Let’s take a walk down memory lane.

In 1965, Singapore’s Gross Domestic Product (GDP) stood at US$974 million. In 2014, that figure has grown to an estimated US$306 billion.

Over the course of half a century, Singapore’s economy has grown by 31,417% in total, or roughly 12.2% per annum. That’s a remarkable growth rate for any company, let alone a country. It’s indeed an achievement to be proud of.

Now it’s Berkshire Hathaway’s turn to step up to the plate. Back in 1965, the company’s book value (total assets minus total liabilities) was only US$22 million. At that time, its market value was even lower at US$18 million.

If we now jump forward to the end of 2014, on 31 December 2014 to be exact, Berkshire Hathaway’s book value was at US$240.2 billion while its market value US$377.2 billion.  That’s a compounded annual growth rate of 19.4% in book value and 21.6% in market value for Berkshire Hathaway.

In absolute terms, Berkshire Hathaway’s book value and market value had increased by 751,113% and 1,826,163% respectively over half a century.

And the winner is…..

Although it is not practical to compare a company with a country, it seems that Berkshire Hathaway has come in far ahead of Singapore in terms of growth over the past 50 years despite the latter’s already strong growth in that timeframe.

This exercise also highlights two important points which are worthy of sharing:

  1. The power of compounding becomes glaringly obvious over long frames of time. A $1000 dollar investment in Berkshire Hathaway in 1965 would now be worth $18.262 million.
  2. A slight difference in annualised returns can make a huge difference after long stretches of time. Although Berkshire Hathaway’s market value only grew by 2.2 percentage points more than book value in each year on average,  the end result is that Berkshire Hathaway’s market value had increased by more than 2.4 times its book value.

Foolish Summary

This is just a fun exercise to help us gain some perspective on how far both Singapore and Berkshire Hathaway have come in half a century. Regardless of whether you have been a citizen in Singapore or an investor in Berkshire Hathaway, the past 50 years would likely have been a really enjoyable ride.

Happy SG 50!

If you're interested in more investing analyses and the latest news about Singapore's stock market, you can get both from The Motley Fool's free investing newsletter, Take Stock Singapore. Written by David Kuo, Take Stock Singapore can help you grow your wealth in the years ahead. So, come sign up here.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim owns Berkshire Hathaway Inc.