Warren Buffett issued his annual shareholder letter on 24 February. At 87 years of age he is still going strong. His letters seem to be getting shorter as time goes on but there is still plenty to learn.
Buffett highlights that even Berkshire Hathaway has suffered losses over the years.
Period | High | Low | Percentage Decrease |
March 1973 – January 1975 | 93 | 38 | -59.10% |
02 October 1987 – 27 October 1987 | 4,250 | 2,675 | -37.10% |
19 June 1998 – 10 March 2000 | 80,900 | 41,300 | -48.90% |
19 September 2008 – 05 March 2009 | 147,000 | 72,400 | -50.70% |
In December 2007, Buffett made a public wager that the S&P 500 would outperform any fund manager out there. One party took him up on his bet, Protégé Partners. They picked five “funds of funds”, which in turn owned interests in more than 200 hedge funds, so there was quite a lot of funds involved.
So, how did they all do?
Year | Fund of Funds A | Fund of Funds b | Fund of Funds C | Fund of Funds D | Fund of Funds E | S&P 500 |
2008 | -16.50% | -22.30% | -21.30% | -29.30% | -30.10% | -37.00% |
2009 | 11.30% | 14.50% | 21.40% | 16.50% | 16.80% | 26.60% |
2010 | 5.90% | 6.80% | 13.30% | 4.90% | 11.90% | 15.10% |
2011 | -6.30% | -1.30% | 5.90% | -6.30% | -2.80% | 2.10% |
2012 | 3.40% | 9.60% | 5.70% | 6.20% | 9.10% | 16.00% |
2013 | 10.50% | 15.20% | 8.80% | 14.20% | 14.40% | 32.30% |
2014 | 4.70% | 4.00% | 18.90% | 0.70% | -2.10% | 13.60% |
2015 | 1.60% | 2.50% | 5.40% | 1.40% | -5.00% | 1.40% |
2016 | -3.20% | 1.90% | -1.70% | 2.50% | 4.40% | 11.90% |
2017 | 12.20% | 10.60% | 15.60% | N/a | 18.00% | 21.80% |
Final Gain Average | 21.70% | 42.30% | 87.70% | 2.80% | 27.00% | 125.80% |
Annual Gain | 2.00% | 3.60% | 6.50% | 0.30% | 2.40% | 8.50% |
We can clearly see who the winner is. Buffett highlights that the average fixed fees for his competition was 2.5%. As he says “performance comes, performance goes. Fees never falter”.
And finally, he mentions that if any Berkshire manager or directors own company stock, they bought them on the open market or received shares as part of their agreement to sell their companies to Berkshire. No free shares to employees. No one great the upside of ownership without risking the downside.
If you have any questions, you can send me an email at steven@bluewaterfp.ie