Since Berkshire Hathaway released its first-quarter results and held its annual shareholders meeting late last week, several journalists and commentators have spotlighted Warren Buffett’s relatively lacklustre performance in recent years.
In the first three months of the year, the company more than doubled its profit, thanks to its insurance operations, derivatives holdings and manufacturing businesses. After taking a $337-million (U.S.) loss on its holdings of Texas Competitive Electric Holdings bonds, Berkshire still managed to post profit of $3.3-billion.
However, the company has underperformed the S&P 500 for the last three years. David Loeper, a contributor to Forbes’ Advisor Intelligence blog, notes today that the Vanguard Total Domestic Equities (VTI) has outrun Berkshire Hathaway by 8 per cent over the last three years, and by 0.21 per cent over the last decade.
Buffett’s golden reputation has been used to by many to justify active management. But Loeper notes that the VTI has performed in the top 1 per cent of its peer group of large-cap blend funds for the last decade, and the SPDR S&P500 exchange trade fund (SPY) has performed in the top 1 per cent of its large-cap blend peers over the last fifteen years.
“I suspect that Buffett would acknowledge he has never had a “magic touch at all”– just a great deal of good luck and the knowledge that the best rational decision would be to index…something he has frequently advised,” Loeper writes.