Warren Buffett Continues To Outperform The S&P 500

In the book "The Snowball: Warren Buffett and the Business of Life" by Alice Schroeder, the writer details a speech that was given by Buffett at the annual Allen & Co. Sun Valley get-together.

At the time, Buffett was getting killed by many for his reluctance to invest in technology companies, namely high-flying Internet stocks.

In fact, Berkshire Hathaway would get stomped by the S&P 500 in 1999, as Berkshire Hathaway lost 19.9%, while the S&P 500 gained over 20%.

Buffett, who was nearly the age of 70 at the time, was under attack by people claiming that he was too old, too out-of-touch to profit from a changing world.

Buffett's speech was attended by many of the most important people in the business world who desperately wanted to hear what the "Oracle of Omaha" made of the "dot-com boom".

Buffett's speech savaged the current state of affairs in his understated way. The dot-com stocks were particularly targeted in his speech, which led to more derision from the leaders of that industry.

Buffett, these people said, was over-the-hill and past his prime. Who cared what he thought? Sure, Buffett had established himself as the greatest investor of all time, but he was over the hill.

Remind you of anything? It reminds me of the current market, when people are once again declaring that Buffett has lost it. That Berkshire Hathaway has far too much cash on its books. That Berkshire Hathaway has missed out on deals that it would have closed on in the past.

Of course, this drumbeat has gotten much louder because the market trounced Berkshire Hathaway's returns in 2019, with the S&P 500 returning over 30%, and Berkshire Hathaway gaining just 11%.

The gains in the S&P 500 were largely due to the strong performances of technology companies.

It's a "Brave New World" and Buffett simply doesn't have it anymore. He is too old and too out-of-touch. Remind you of anything?

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Here's an interesting stat.

Since people declared Buffett irrelevant in 1999, Berkshire Hathaway has easily outperformed the S&P 500.

From 2000-2019, Berkshire Hathaway had a cumulative return of 213.7%.

From 2000-2019, the S&P 500 had a cumulative return of 153.8% (including dividends).

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Buffett, despite being 90 years of age, is still out there making deals. He just won't overpay for anything.

It's easy to write off Buffett when the S&P 500 is going crazy and Berkshire Hathaway is getting outperformed by a mile.

History says, however, that those who ridicule Buffett at a market top will end up looking foolish, just as they did in 1999.

Filed under: General Knowledge