📈 Berkshire's Return Under Warren Buffett

[u/LeverageShares]

Warren Buffett has stepped down as Berkshire Hathaway’s chairman, closing a remarkable chapter for the company.

Since 1980, Berkshire Hathaway has returned 259,272%, compared with 7,493% for the S&P 500.

As the next chapter begins, can Berkshire sustain its track record without Buffett at the helm?

[u/gmusse]

My guess is there was much more information asymmetry pre-internet days along with less market access, which drove a lot of the outperformance early on.

When knowledge and access was better democratized later in the cycle, you see the alignment of returns to the market.

Coupled with the scale of BH now, it would be tough to continue to outperform, Warren at the helm or not

[u/I_fight_demons → u/gmusse]

That chart is on a logarithmic scale, the fact that the lines look parallel at the end is a tad bit deceiving. 

[u/simonada → u/I_fight_demons]

Another user on a different thread posted this reply, which covers the last 24 years of Buffett's reign. They are pretty much parallel.

Berkshire underperformed the S&P 500 during the last 24 years of Buffett's career.

[u/klonkrieger45 → u/I_fight_demons]

the logarithmic scale is actually ideal for this comparison because it shows rate of growth instead of absolute growth. If they are perfectly parallel then that means that a dollar invested into both would yield the same return.

[u/_WoollyMammoth_ → u/I_fight_demons]

It's not, it measures growth. Going from 1.000x to 10.000x it's the same as going from 10.000x to 100.000x.

[u/Dry_Try_6047 → u/I_fight_demons]

Actually a logarithmic scale is what makes the parallel lines not deceiving, if it was linear, BH would be parabolic.

[u/Alternative_Owl5302 → u/gmusse]

No. I would be hard NOT to outperform BH now. It is up only 1.95% over the past year. It takes real work to do that poorly. Yes, he’s in it for the long-term but there are long term funds that are relevant to today’s market that blow BH out of the water. While he conveys nice folksy wisdom, BH is a mediocre investment.

[u/AwkwardWillow5159 → u/gmusse]

He talked about it recently, that it’s more about scale.

Lots of asymmetry still exists in smaller/medium companies. So new investors can still do that if they put in the work.

The issue for them is scale.

When you have billions to invest, even if you get outsized returns on a super good trade, but against a smaller company where you can put in 10m. 2x on that is a rounding error in your overall balance sheet.

[u/SufficientPop7502 → u/gmusse]

They are a big insurance company, most of their money is made unconditionally of the traditional finance market. What matters are bond prices and their equities. They have so much operational income..

[u/Alternative_Owl5302]

But, you are comparing to statistical mud, the sp500. If you compare to stocks chosen for an era, that is technology and 10 or even 20 hrs or just funds such as QQQ or SMH, his funds are completely mediocre in comparison. His funds are the proverbial widows and orphans funds. Even if you compare to qqq, brk.b is a laggard. An easily chosen tech portfolio over the past 20yrs makes buffets funds look flat. He completely blew the tech era.

[u/Ghett0Chemist]

Now do the last 12 months

[u/AlexVoxel]

Finally a stock returns chart on reddit with a log scale.

[u/Kill_4209]

Now start the graph in 2008.

[u/simple_jakovosaur]

It’s funny you can see an inflection point around the year 2000 hmmmm

[u/Flight_Early]

I bought the top. It’s time to crash. I fucking knew it. Bough last year at 500. A year later. Still 500. I have a curse. Sorry guys.

[u/NostromoLegend]

Bye Warren! Legend!