InvestorQ : Is it true that Warren Buffet has underperformed the markets during the year and any specific reasons for that?
Deepa Salunkhe made post

Is it true that Warren Buffet has underperformed the markets during the year and any specific reasons for that?

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Juvina Maggie answered.
2 years ago
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You are right that Buffett has seen the biggest yearly underperformance since the year 2009 when the world was in the midst of a financial crisis. In fact, many large investors like Bill Ackman had invested heavily in Berkshire Hathaway stock (Berkshire is the holding company of the Warren Buffett group) but that stock has underperformed this year. Actually, they may not have bargained for such a huge underperformance. Since beginning of 2019, Berkshire Hathaway stock has seen value increase by just about 4.3% while the S&P 500 index is up by nearly 23% during beating Buffett by a margin of nearly 18%. The last time that Buffett had to endure such a performance was back in 2009.

One clear reason is that the Buffett investment model is sitting on just too much of cash. It is not small, but Buffett sits on a full $122 billion. For investors like Berkshire Hathaway value comes from constantly putting money to use. The last big investment that Buffett did make was in IBM and that also he was forced to exit at a marginal profit. Apple has stood by Buffett in the last few years. The only big recent purchase was his stake in Occidental Petroleum after it agreed to buy Anadarko.

What markets are really worried about Berkshire Hathaway is their stash of $122 billion which they are not putting to good use. Now, compare with how the Berkshire stock has done against some marquee technology stocks. Microsoft is up 45% this year, Alphabet (the holding company of Google) is up nearly 30% and Facebook, despite all the hiccups, is up 55% from the March lows. That is the reason, a lot of global investors are beginning to question Buffett’s long term strategy.

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