Has Buffett really lost his edge?
The Oracle of Omaha hasn't beaten the market in a while, critics note. Defenders say he's playing the long game.
Is Warren Buffett really losing his mojo?
That's the assertion behind a weekend New York Times column by Jeff Sommer keying off a statistical analysis by statistician Salil Mehta that finds Buffett (pictured), while having enjoyed a stellar run over the past nearly half-century, isn't doing so hot recently.
The study finds that while Buffett has produced an impressive dose of alpha -- the ability to outperform the market without adding risk -- over several decades, his more recent performance "isn't impressive at all," Sommer writes. Read a related blog post by Mehta here.
For four of the past five years, Sommer recounts, citing the analysis, Buffett has underperformed the typical, no-frills Standard & Poor's 500 Index ($INX) fund. In fact, he's done "so much worse that it's unlikely to be a matter of a string of bad luck. Mr. Buffett has begun to behave like an investor with no alpha at all," Sommer writes.
Sommer and Mehta both take pains to emphasize how impressive and, perhaps more importantly, how rare Buffett's long-term track record has been. Buffett from 1965 through the end of 2013 outperformed the S&P 500, including dividends, by 9.9 percentage points, annualized. According to Mehta, that puts Buffett in a group amounting to less than 1 percent of the total investor population statistically likely to have been able to beat the market over a period of 45 to 50 years.
At the same time, Sommer notes, the analysis finds that there's only a 3 percent chance that Buffett's recent underperformance is the result of bad luck.
Buffett's defenders argue that while there are many useful observations in Mehta's analysis, it doesn't mean Buffett has lost his edge.
Michael Ide at value-investing blog ValueWalk argues that Buffett's long-term strategy historically earns less when the market soars and loses less when it falls, leaving it to come out ahead on an annualized basis over nearly 50 years. (A point made by Buffett in his last shareholder letter and acknowledged by Sommer and Mehta).
Eamonn Fingleton, writing at Forbes, argues that Mehta is missing an important point. While the share price of Berkshire Hathaway (BRK.A) rose 84 percent from end-2008 to end-2013 versus a 104 percent rise by the S&P 500, the more important measure is Berkshire's profit performance, which has risen 268 percent on a per-share basis.
More from MarketWatch
Sometimes I wonder if people have just woken up from a long sleep
or if they're fresh out of High School and this is the first time reading the news...
This ant his first rodeo...
This is just an article some jackass wrote to drag you into MSN..
Uncle Warren has forgotton more about investing then the yahoo's in this article.....end of story.
Is Warren Buffett really losing his mojo?
LOL when he drops out of the top ten for five years I'll worry myself sick about it.
I've mentioned this and said this about Buffet for a few years also...
I have great respect for Warren Buffet and what he has accomplished over his life time..
He and Charlie Munger, his business partner, along with others and BERK, have taken financial investing to a whole different level...
There are only a handful of others that have done as well.
Over the last few years, they have become a little complacent and been off their game some.
At his age, in his mid 80's and Munger older then that, they have slowed down and are not as aggressive as he or BERK have been in past.
Buffet and/or BERK are grooming a couple new guys, to possibly take over the day to day operations? (Todd and Todd)..Giving them a free'er hand in investing some of the assets of BERK.
There is also one woman that is involved at higher levels, (can't remember name).
I think he is ready to take a bigger role in retirement, and step back a little to relax the rest of his life....And he is thinking ahead and knows it too.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
Traders might want to bite on BABA, but long-term investors have reasons to wait.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.