Warren Buffett's Berkshire Hathaway has outperformed the market in the last 3 recessions - and its positioned to do so again in a 2023 downturn, UBS says

• Warren Buffett's Berkshire Hathaway will outperform the market in a potential downturn this year, UBS said.
• The conglomerate run by the legendary investor has outperformed the S&P 500 in the past three recessions.
• So far in 2023, the firm's class B shares have underperformed the broader market. 

Warren Buffett's Berkshire Hathaway has outperformed the market in the past three recessions – and the stock is positioned to do so again if a downturn hits in 2023, according to UBS.

"During the past three recessions, BRK's shares have outperformed the market and other financials owing to its diverse business mix, very strong balance sheet, and substantial liquidity. Given the uncertain economic outlook in 2023, we believe BRK's stock can outperform," analysts said in a note this week, pointing to the conglomerate's strong performance in previous economic downturns.

The Swiss investment bank gave a 12-month price target for the company's class B shares of $362, 17% higher than Wednesday's closing price of $308.48. 

The analysts point to the recession of 1990, when Berkshire Hathaway's A shares gained 19% three months prior and during the downturn, though the S&P 500 gained only 10%. 

In that same amount of time during the 2007 recession, Berkshire shares lost 24% in value, though the S&P 500 tanked by 37%.

In the recession following the dot-com bust, Berkshire shares saw a 12% return, though the S&P 500 saw a 15% loss during that time period.

The same held true during the 2022 bear market. Though the S&P 500 tanked 20% last year amid rising inflation and aggressive interest rate hikes, Berkshire Hathaway stock rose 3%, helping Warren Buffett surpass former Amazon CEO Jeff Bezos on the list of richest people in the US. 

The strong outperformance and its resilience in a theoretical recession is largely due to Berkshire's oil and gas investments, as well as the general health of its financials, UBS said, which should make the conglomerate "insensitive" to an economic slowdown.  

Meanwhile, Wall Street is still portraying a gloomier outlook in 2023, with banks warning of a recession as the Federal Reserve stays aggressive on monetary policy. That could push the economy into a downturn, experts warn, with Morgan Stanley, Bank of America, and Deutsche Bank predicting a roughly 20% decline in the S&P 500 in the first half of the year.