Has Warren Buffett Lost His Touch?
The Oracle of Omaha has been underperforming the S&P 500 by 17% in 2020
You’ve probably heard all of the arguments before:
“Warren Buffett is washed up.”
“He’s past his prime.”
“He manages too much money to find good deals anymore.”
And with Berkshire Hathaway underperforming the S&P 500 by 17% halfway into 2020, I understand the sentiment. However, this isn’t the first time that people have questioned Warren Buffett’s competence as an investor.
In December 1999, during the height of the dot-com bubble, Barron’s released an article titled, “What’s Wrong, Warren?” that questioned whether Buffett (then 69) had become an old man who was out of touch with the shiny new internet economy, in contrast to VCs who were more than exuberant and pumped nearly 40% of their investments into internet startups before the dawn of Y2K. And it wasn’t just the professionals who wanted in: Between the mid-to-late-’90s amateur investors day-traded their way to becoming overnight millionaires via rampant speculation on explosive tech stocks.
If you had purchased Berkshire stock on December 27, 2002 you would have underperformed the S&P 500 by 2% annually through today.
This was the era in which companies like Pets.com, Webvan (today’s version of Instacart), and Boo.com (aspiring to be like the trendy online retailer ASOS) were immortalized for their failures of being too ahead of their time, and the era when a new generation of tech upstarts came onto the scene, including then-private companies Netflix and Google in ’97 and ’98, respectively. And with Berkshire trailing the S&P 500 by 43% at the time “What’s Wrong, Warren?” was published in late ’99, the theory seemed not only plausible, but convincing:
But it was Buffett who would go on to have the last laugh as the bubble popped and wiped out nearly 80% of the Nasdaq’s value, resulting in the loss of billions of dollars of equity. In…