Warren Buffett’s Berkshire Hathaway still gives investors greater returns than just buying the S&P 500, but it’s doing worse and worse. At the moment, the ratio of total return on the Berkshire Hathaway stock market to the S&P 500 wide market index has dropped to a record low since 2001 (see the chart above, ProFinance.ru comment), said Jim Bianco, head of Bianco Research.
* ProFinance.ru: total return on the stock market (total return) – increase in the value of the portfolio (growth in the stock price + dividends), taking into account reinvestment of profit.
This indicator formed an annual peak on March 16 and has since declined by 23%, follows from Bloomberg data. Warren Buffett and colleagues achieved the best relative results during the collapse of the stock market in 2008, when the Berkshire Hathaway portfolio suffered much less than the wide market.
In the same way, the company showed significantly better dynamics than the S&P 500, after the dot-com bubble burst due to the absence of highly speculative securities in the portfolio. However, it was this fact that did not allow Warren Buffett to earn money during the take-off of the Nasdaq technology sector in the late 1990s.
Today’s weak performance of Berkshire Hathaway can be explained by the fact that the Fed greatly distorted the stock market, starting to pump it up with money after a coronavirus collapse. This has led to the fact that in recent months stocks of financially weak companies, which are often in pre-bankruptcy condition (or even announced about it like Hertz), show better dynamics than “reliable” papers from Warren Buffett’s portfolio.
“Over the past 25 years, Berkshire Hathaway has turned into mediocrity,” tweeted Jim Bianco.
On this topic:
Did Warren Buffett lose his grip?
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