What do tens of thousands learn from attending his annual junket? And does his track record stand up to scrutiny?
About 50,000 people from all over the world travel to Berkshire Hathaway’s annual conference in Omaha (hence “Sage of Omaha”). Many go year after year. What is the point? Are they really going to learn anything new, year after year?
Shane Parrish said “
you find the same topics year after year. The same phrases. The same patterns.” Bland questions repeat year after year, and receive “
the same predictable answers”. So why did Shane, a self-proclaimed “
Buffett junkie”, go 10 years on the trot?
The attraction is the very fact that nothing changes.
50,000 people get a chance to re-focus, in two ways.
Firstly, re-focus on the Buffett Value-style approach to investing. If you have the skills and patience to pursue such a strategy, going back every year is vital reinforcement, hard wiring. Rinse and repeat.
Secondly, they can sift the noise accumulated over the prior 11 months. Most investors have a strong curiosity gene, and have a burning desire to learn. But the key to successful investing is to realise that most of what you hear is noise, not learning, and of no or limited investment value. So Warren and Charlie perform the absolutely vital task of keeping attendees focussed on what has value – in their case, Value!
By attending the conference from year to year you aren’t compounding knowledge, in the sense that you add to it by listening to Warren. You are compounding the application of that same knowledge.
Rinse and repeat. You suppress one of those unhelpful, but natural, traits which make the vast majority of us naturally bad at investing.
In our way, we try and do the same. With our ratings - portfolios - stop loss alerts – reviews – performance tracking and so on - our objective is also to keep you focussed, in our case applying a Momentum-style of investing for 90% of the time.
We will cover “noise” every so often – often because there is a media obsession, and we need to tackle it, create context, and hopefully prevent us all being distracted by it.
Dwindling Performance for Buffett?
Warren Buffett typically gets a lot of media coverage at this time of year because of his annual junket, and the media worshippers are revealed.
One in particular referred to “a long term track record of delivering outsized returns to investors”. This is very similar to what was said of Woodford until it was too late for believers, and similarly in the years before 2000 with Equitable Life, before they fell off a cliff.
P.S. – we aren’t comparing Woodford and Buffett, but we should all be aware of a media frenzy surrounding any fund manager…
Let’s have a look at the Buffett vehicle, Berkshire Hathaway (BH), over 5, 10, and 20 years.
The best way to make the comparison is by comparing BH with its local index, the S&P 500 index. I also show the same for our Dynamic UK Blended Portfolio.
You can see by the numbers in Table 1 that BH has increasingly struggled since the turn of the millennium. In contrast the Dynamic Portfolio has maintained an extremely large level of extra growth.
The most important lesson of this blog?
A fund manager is flesh and blood, even Warren Buffett, and like every great fund manager before him, the magic wears off one day.
In contrast, momentum, driving our Dynamic Portfolio is what happens every day – and it is perpetual.
Table 1: Buffett and FundExpert total return vs. Indices
|
|
5 year TR %
|
10 year TR %
|
20 year TR %
|
|
FTSE 100
|
36%
|
68%
|
143%
|
|
Dynamic UK Blended
|
133%
|
318%
|
1,355%
|
|
difference
|
97%
|
250%
|
1,212%
|
|
|
|
|
|
|
S&P 500
|
102%
|
207%
|
375%*
|
|
Berkshire Hathaway Inc.
|
88%
|
230%
|
477%*
|
|
difference
|
-14%
|
23%
|
102%
|
Performance figures correct as of 1st May 2021
*20-year TR figures from 30/12/2002