With the masses descending on Omaha this weekend to hear Warren Buffett at the Berkshire Hathaway annual meeting, it is a good time to take a look at the stock. Investors are expected to ask why the stock has been lagging the Standard & Poor’s 500, among other issues.
But one look at the chart tells us that lagging performance depends on the time frame examined. Over the past 10 months, a time span chosen for the reason discussed below, then yes, Berkshire Hathaway only gained 1.9% vs. the S&P 500′s gain of 26.6%. But if we look farther back, it is not quite so bad.
However, if we start the comparison in January 2010 then Berkshire actually beat the market by a small amount.
Analysts can torture data such as this any way they choose and that is why it is important to look at a stock over multiple time periods. I chose a 10-month look-back for the current bout of underperformance because the relative performance chart itself peaked in Jun 2010 as shown in the chart. I don’t want to gloss over the fact that Berkshire is still lagging but over a period of three years Berkshire paced the market – no better, no worse.
And finally, not that he needs my defense, Chairman Buffett has put together a company of such diverse parts that it almost mimics the market itself. It would be difficult to beat the market except during times when sectors not in the Berkshire family are falling. The tech wreck in 2000-2002 is a good example of this.
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