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Berkshire Hathaway’s sheer size makes it much more difficult to find companies that make a difference to its bottom line. Berkshire Hathaway stock over the past 20 years has almost precisely equaled the return of the S&P 500 SPX.
Let that sink in for a minute.
Berkshire Hathaway’s CEO, Warren Buffett, widely considered to be the most successful investor alive today, has merely matched the market’s return over the past two decades.
The fundamental question this raises for investors is how long we should give a manager the benefit of the doubt when failing to beat the market.
All of us can readily agree that even the best advisers will suffer short-term periods of market-lagging returns. But as this period of underperformance lengthens, it becomes increasingly difficult to write it off as a fluke.
We can all hope that Buffett chooses to address this question in his much-anticipated shareholder letter, which is expected to be released in conjunction with Berkshire Hathaway’s earnings report later this month. A telephone call to Berkshire Hathaway seeking comment was not immediately returned.
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