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“ ‘I am nervous that he may have missed this whole rally… That’s frustrating. A lot of retail investors were ploughing money into the market and doing better than professional investors. I think you can include Buffett in that.’ ”
That’s Edward Jones analyst James Shanahan, one of many who shared their thoughts with the Financial Times on the underperformance of Warren Buffett’s Berkshire Hathaway BRK.A, +0.56% BRK.B, +0.41% during this historically turbulent year for markets.
Buffett endured his worst performance vs. the S&P 500 index SPX, +1.89% in a decade last year, and 2020 is on track to be nearly as bad, the FT noted. That has left many to longtime Buffett observers to question the direction the company, which was caught wrong-footed by the coronavirus crisis.
CFRA Research analyst Cathy Siefert said Berkshire’s “chronic underperformance” needs to be answered for, especially considering some of Buffett’s decision-making in recent years, including the writing down of his stake in Kraft Heinz KHC, +1.89% by $3 billion and the “unmitigated disaster” that was his Occidental Petroleum OXY, +6.50% deal.
“Those two things, I believe, have really tarnished Berkshire’s reputation for deal making,” she said.
Buffett’s misfire in the airline sector was also called into question in the FT piece. He added to his holdings in America’s biggest carriers to start the year and then unloaded them as the coronavirus outbreak disrupted the entire industry. They have since bounced off the lows.
Also, Berkshire’s record cash pile of $137 billion has come under fire, with investors questioning why Buffett didn’t follow his own advice and be “greedy when others are fearful.”
Buffett, who did not respond to a request for comment on the story, explained last month that he didn’t buy because he didn’t find anything attractive enough. The Federal Reserve “did the right thing and they did it very promptly and I salute them for it”, he said at the time. “But a lot of companies that needed money… got to finance in huge ways.”
Perhaps it’s time for a new way of thinking?
“If Berkshire is to have the prospects of generating the value it has in the past, it has to adapt by buying these companies that will generate significant value over the next 25 years,” said decadeslong Berkshire shareholder Christopher Rossbach, chief investment officer of J Stern & Co.
“Both Warren and Charlie have acknowledged that they have missed Amazon AMZN, +1.65% and that they should be looking at these companies but they have also said they don’t understand them,” Rossbach explained to the FT. “They have kept them in the box that Warren has on his desk that says ‘Too hard’. What will it take for them to take these stocks out of the box?”
Berkshire does have a relatively small stake in Amazon, while Apple AAPL, +2.65%, a rare bit of technology in the fund, remains the portfolio’s single biggest holding.
Shares of both Apple and Amazon were up nicely in Tuesday’s trading sessions, riding the broader market higher as the Dow Jones Industrial Average DJIA, +2.04% , S&P 500 and tech-heavy Nasdaq Composite COMP, +1.74% advanced about 2% each.
