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Posted by Elle on June 22, 2008, 11:23 am
> Buffett's partnership portfolio over ten years grew by a
> modest 1,156%
> compared to the Dow's 122.9% and other major world
> indices.
>From googling, I see the figures above referred to in the
book _The Making of an American Capitalist_ . I do not like
that it focuses on a mere ten-year period that seems to be
hand-picked. The ten-year period seems to have occurred in
the 1960s, per a quotation here,
http://www.lsgifund.com/lsgireport/LSGILetter.pdf which
states Buffett beat the Dow by 21.8% a year for 13 years.
Numerous sites state that Buffett and his partners scored a
coup c. 1964 when the partnership put 40% of its stock in
the troubled American Express Company (AXP) (after it had
tanked by 50% on "bad news") for $35 a share. By 1967, AXP
had risen to $180. Does this explain much of his success in
the aforementioned 10-year period? If so, uh, foul!
About mid-2007, Buffett bought around $450 million of BAC.
In August, his BH stock portfolio (40 stocks or so) was
worth about $61 billion, so his BAC position was less than
1%. By my reckoning, his BAC stock is now worth about half
as much at $243 million.
I guess with hindsight, how much exposure various banks had
to subprime mortgages was not available to investors. Did
the Oracle of Omaha himself get fooled? It's only been
several months, but, unlike AXP in the 1960s, it's not like
BAC had tanked when Buffett bought it. In fact, BAC was at
or near a historical high. Then the writedowns (surprise!)
began.
I think this focus on ten years in the 1960s exaggerates
Buffett's success. He's good, and I celebrate his approach
in general, but I don't know that he's a wizard whose every
move should be followed. I'd like more figures on his stock
investing performance. (I bear in mind that his company also
buys companies not publicly owned--that are not stocks--that
seem a value. I am not interested in this, since it's not
something this group contemplates for most posters here.)
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Posted by Will Trice on June 22, 2008, 9:20 pm
Elle wrote:
> Numerous sites state that Buffett and his partners scored a
> coup c. 1964 when the partnership put 40% of its stock in
> the troubled American Express Company (AXP) (after it had
> tanked by 50% on "bad news") for $35 a share. By 1967, AXP
> had risen to $180. Does this explain much of his success in
> the aforementioned 10-year period? If so, uh, foul!
Nice research here. But why the foul?
-Will
william dot trice at ngc dot com
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Posted by dapperdobbs on June 23, 2008, 5:05 am
> Elle wrote:
> > Numerous sites state that Buffett and his partners scored a
> > coup c. 1964 when the partnership put 40% of its stock in
> > the troubled American Express Company (AXP) (after it had
> > tanked by 50% on "bad news") for $35 a share. By 1967, AXP
> > had risen to $180. Does this explain much of his success in
> > the aforementioned 10-year period? If so, uh, foul!
>
> Nice research here. But why the foul?
>
> -Will
>
I definitely agree, nice piece of research Elle did there.
Not his foul, IMO, but a foul for the people who tab the stats for
BRKSY. Not to disparage Buffett, but the public noise over the fund's
performance - *without explaining AXP and private company
contributions* - may have discouraged many would-be individual
investors. I can't be the only one who has felt downright stupid, can
I:?
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Posted by Elle on June 23, 2008, 12:11 pm
Ever in search of brevity, snip
> But why the foul?
To me the OP's article suggested that Buffett was a sage as
a stock picker. But if much of his success in this single
ten-year period was due mostly to a single, very good stock
selection, then to me, this does not define a sage. I think
Buffett is still good with his stock and non-publicly traded
company investments, as evidenced by, for one, the last ten
years per
http://www.berkshirehathaway.com/letters/2006ltr.pdf . BH
stock beat the S&P by about 6% on average per annum from
1997 to 2006. But I hesitate to infer this denotes
wizard-like stock picking, though, since the BH company does
not buy solely stocks.
On the third hand, the guy does not exactly tout himself as
a wizard. In the letter linked above, Buffett writes with
great humility about the mistake he and one of his partners
made when they bought Blue Chip Stamps decades ago. On the
fourth hand, freely describing mistakes one has made is the
sign of someone who is honest, learns from the mistakes,
etc. This might put him back in the oracle category in many
people's eyes. It improves his credibility, and so forth, to
me.
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