In a couple of weeks, I’ll be joining investors from all around the world who are making a pilgrimage to the US mid-western city of Omaha, Nebraska.
I – and 40,000 other like-minded people – will file into a sports stadium to watch two octogenarians field questions from the audience for 5 hours. The two men in question are investing legends Warren Buffett and his business partner Charlie Munger.
‘Buffett Has Lost It’… again…
There’s a reason we at The Motley Fool are fans of the man known as The Oracle of Omaha and the whip-smart Munger.
Buffett, who has compounded book value at his company, Berkshire Hathaway (NYSE: BRK-A, BRK-B), at an astonishing 19.7% per year for almost 50 years, is the greatest investor of our time, and likely of all time.
That doesn’t stop people forecasting his demise. I don’t know whether it’s some sort of tall poppy syndrome, or a form of self-interest that has pundits hoping to make a name for themselves by hoping to ‘predict’ Buffett’s decline and eventually being right.
What I do know is that every doubter for five decades has been wrong.
Brave or crazy?
I’ll give those pundits something, though… they’re brave. Warren Buffett has an astonishing track record. He’s managed to absolutely trounce the benchmark index by a long, long way during his career.
Of course, there’s brave and there’s ‘crazy brave’. Or maybe just crazy.
If you’re old enough — and have been investing long enough — you’ll remember the tech boom of the late 1990s. Even the humble former government telco Telstra (ASX: TLS) wasn’t immune. Its share price was hitched to the dot.com bandwagon, allowing the then-government to launch the second tranche of its privatisation at $7.40 in 1999!
Those were crazy times, and Warren Buffett was on the nose.
‘What’s Wrong, Warren?’
On December 27, 1999, The Wall Street Journal carried a story titled ‘What’s Wrong Warren?’, which neatly summed up investor sentiments of the time.
It started boldly:
“After more than 30 years of unrivalled investment success, Warren Buffett may be losing his magic touch.”
It went on:
“To be blunt, Buffett, who turns 70 in 2000, is viewed by an increasing number of investors as too conservative, even passe. Buffett, Berkshire’s chairman and chief executive, may be the world’s greatest investor, but he hasn’t anticipated or capitalized on the boom in technology stocks in the past few years.”
My favourite was:
“Indeed, Buffett has even started taking flak on Internet message boards. One contributor called Berkshire a ‘middlebrow insurance company studded with a bizarre melange of assets, including candy stores, hamburger stands, jewelry shops, a shoemaker and a third-rate encyclopedia company [the World Book].’”
The shares were around US$54,000 a piece. Today, even after the 5 or 6 ‘lost’ years of the GFC, Berkshire shares are, ahem, US$183,200.
Once bitten, twice… bitten!
So pundits learned their lesson, right? Wrong.
This headline was from 2008, on Reuters: Is Warren Buffett losing his touch?
Then this, in 2010, at Nasdaq.com: Has Warren Buffett lost his mojo?
Now, in 2014, we have a Slate.com article asking: Should investors still have faith in Warren Buffett?
Buffett is fallible. He makes mistakes. Maybe — eventually — one of these pundits might be right. But try telling that to the people who baulked at Berkshire in 1999 and have regretted it ever since.
Yet there remain those who would have us simply give up on trying to mirror the Oracle of Omaha’s investment success.
Those in the ‘don’t bother’ camp seem to suggest that unless we can match Buffett’s record, we shouldn’t try. Which is, as you’d know, complete rubbish. Investing isn’t a ‘winner takes all’ event. This isn’t Survivor: Wall Street, where everyone else gets voted off the island.
Getting a Buffett-like return is the equivalent of batting like Bradman. So should Tendulkar, Ponting, Pietersen, Clarke et al have never bothered playing test cricket, because they couldn’t hold a candle to The Don? Of course not — such thinking is ridiculous. Well, it would be, if some commentators weren’t implying exactly that!
One well known commentator offered this opinion last week:
“There is no Warren Buffett Way for other investors, there is just picking stocks that go up in price and to do that you would be well advised to rely on yourself, just you, with your understanding, your time horizons, your risk profile and your expectations. Not Warren Buffett’s. Forget Warren. You are not Warren.”
He’s entitled to that view. But if you’re not going to try to emulate Warren Buffett — the greatest living investor, who shares his investing advice freely to anyone who wants to listen — just where are you going to get your investing compass from?
From your broker, who makes money when you trade, not when you make money? From your financial advisor, who gets paid a chunk of your hard-earned, regardless of whether he or she makes money for you? From your cabbie? Your mate at a barbecue?
Warren Buffett isn’t the only investor worth paying attention to, or learning from. But in the absence of a better alternative, the guy with the 50-year track record beats the pants off anyone else I can think of! I can’t be Warren Buffett, but I can sure as heck try — and be better off as a result.