Five charts to start your day

Will it matter who takes over Warren Buffett when he is gone?

Does it really matter who succeeds Warren Buffett? I saw this chart in Robert Armstrong's FT Unhedged newsletter last week and I couldn't believe it. It’s based on a wider series on Berkshire Hathaway and Warren Buffett. Over 21 years, Buffett has kind of done the same as the S&P 500.

There are so many things wrong with this though. The time period has been cherry-picked. If you went back further than 21 years, Buffett smashed the index.

2007-2020 was also a weird period to invest: it was an ultra-low interest rate, growth stock period, with lots of asset price inflation. This has not been a typical investment environment over the last 150 years of stock market history. It's also not the environment for finding great value well-managed businesses that Buffett loves.

In short, this was not Buffett's investment environment of choice. But it is relevant, at least to me. I started investing in 2003, which was the start of my career. So this is my investment period. What is remarkable is that despite running what is essentially a value strategy, he has managed to match a market environment where growth stocks are rewarded.

It’s also worth noting that Berkshire Hathaway’s portfolio is very different from the S&P 500. It has a huge position in Apple and holds huge stakes in many private companies that are far removed from the S&P 500. Although there might appear to be some correlation, the drivers of return for both the index and Berkshire Hathaway might be very different.

Source: Eeagli

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