Tags: Vardy | Warren Buffett | Berkshire Hathaway | small caps

Has Berkshire Hathaway Become a Haven for Widows and Orphans?

By    |   Thursday, 27 February 2014 02:08 PM

Has Warren Buffett lost his investment mojo? According to Nicholas Vardy, chief investment officer at Global Guru Capital, the famous stockpicker's returns have not been as successful as his reputation has during the past decade.

In a guest column for MarketWatch, Vardy noted Buffett's long-term performance through the stock of Berkshire Hathaway, the multinational conglomerate he uses to invest in large companies, still far outdistances that of the benchmark S&P 500.

However, then is not the same as now, Vardy wrote.

Editor’s Note:
These 38 Dates Are Key to Bagging $313,038

"Truth be told, Buffett's track record over the past decade has not been stellar, and Berkshire now lags the S&P 500 over that period by more than 1 percent per year.

"Perhaps more ominously, Buffett is starting to fall short by his own standards."

For the first time in 43 years, Berkshire's five-year rolling returns (defined as book value gains) in the period ended Dec. 31 underperformed the increase in the S&P 500, he noted.

"The S&P's sharp rally since 2008 has made Buffett's benchmark particularly difficult to maintain over the past five years. More recently, the rally in tech stocks — and Berkshire's relative underperformance — harkens back to the dot-com era," he argued, another period when Berkshire stock temporarily lagged.

Vardy does not expect Berkshire stock, with its emphasis on the holdings of larger companies, to outperform small cap stocks, with their traditional high-growth potential, in coming years.

But he will continue to recommend Berkshire stock for his clients. The reasons? He regards Berkshire stock as a performance benchmark, it is highly stable and it is a very low-volatility stock, with a beta of only 0.57.

"Buffett's risk-adjusted returns as measured by the Sharpe ratio may be better than a U.S. small cap index — even if it makes less money in the long term."

In other words, Vardy believes Berkshire stock provides an attractively reliable margin of safety for investors in addition to providing a decent return.

In a Fortune excerpt from his forthcoming letter to investors, Buffett offered some tips for investors. Here is a distillation:

• Keep it simple.

• Focus on the prospects for future productivity of the asset you are considering.

• Don't focus only on the price of a stock — just because it's risen in the past does not mean it will do so in the future.

• Don't be preoccupied by daily price changes in an investment — invest, don't speculate.

• Listening to the predictions of others is a waste of time.

Editor’s Note: These 38 Dates Are Key to Bagging $313,038

Related Stories:

© 2019 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
StreetTalk
Has Warren Buffett lost his investment mojo? According to Nicholas Vardy, chief investment officer at Global Guru Capital, the famous stockpicker's returns have not been as successful as his reputation has during the past decade.
Vardy,Warren Buffett,Berkshire Hathaway,small caps
452
2014-08-27
Thursday, 27 February 2014 02:08 PM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved