What's Buffett buying? Who cares?

It's time to end the media's fascination with the Oracle of Omaha, who, despite claims to the contrary, does love publicity.

By TheStreet Staff Nov 1, 2010 11:50AM

By Gary Weiss, TheStreet

 

Some people may call this Indian summer, but I call it Warren Buffett season.

 

It is the only season that lasts 12 months a year. You can't swing a cat around a financial news organization nowadays without snaring somebody writing about Warren Buffett's portfolio. Usually it's along the lines of "What is Warren buying?" But lately there is a hush, and a sad pang can be heard reverberating across the prairie. Warren Buffett is considering a successor!

 

So with reverence more appropriate for the papal succession than a glorified hedge fund, there is one article after another about the Apparent Chosen Successor, a Florida hedgie named Todd Combs.

 

To which I can only add: Who cares?

I know I'm going to get yelled at for saying this, but I am sick and tired of Warren Buffett. Oh, I don't mean the man himself. I met him some years ago, and he is a perfectly decent gentleman. But I am sick and tired of the media fascination with him. I think it's time we moved on to something else and gave this man the obscurity that he supposedly craves.

 

I understand why we are so fascinated with Buffett. I've seen the numbers. I've heard the folksy aphorisms. I'm aware of the several zillion books that people have written about him over the years. I'll admit, he's a great guy, and he has a good record as a money manager. But I think that it's high time that we put Buffett in proportion. Allow me to attempt to do so.

 

Let's start with:

 

The numbers. Despite occasional bad years, it's certainly true that Berkshire Hathaway (BRK.A) stock has beaten the S&P 500 ($INX) for 15 of the past 22 years and boasts a 20% annual compounded gain in book value between 1965 and 2009.

 

That's great. I'll even go so far as to throw my copy of A Random Walk Down Wall Street out the window and say that Buffett pulled off this fine record because he's a great stock-picker and not because a chimp with a dart could have done a better job of picking stocks.


But even if we all agree that the efficient market hypothesis is a load of bunk (which I am not ready to do), the fact remains that long-term performance records don't mean that much to an investor, today, in deciding whether to either buy Berkshire stock or mimic his investment portfolio.

 

For one thing, that long-term great performance record doesn't mean much to investors who bought Berkshire just before the big tumble in 2008. The markets have beaten the pants off Buffett over the past two years (just as they suggest is inevitable in Random Walk).

 

Investing like Buffett. If I had a nickel for every pundit who professes to tell us how we can invest like Warren Buffett, I could probably move to Omaha and set up my own glorified hedge fund. The problem is that Buffett's choices, summarized in the Berkshire Hathaway 10-Q, provide investors with only crumbs -- and widely followed crumbs at that.

 

It does an investor today virtually no good to know that he owned big stakes in Coca-Cola (KO), Wells Fargo (WFC), American Express (AXP) and Procter & Gamble (PG) as of June 30. That's like me telling you what my blood pressure was on that day. I could have had a stroke since then.

 

Buffett is a buy-and-hold guy, so the identity of his oldest holdings is only slightly less consequential than the identity of his newest holdings. By the time any new portfolio change details emerge, they are already old news by the time they are announced.

 

As for his famous ghostwritten letters to his investors, which Berkshire modestly keeps online, they make enjoyable reading, but the key thing to remember is this line that appeared in his 2010 letter: "The big minus is that our performance advantage has shrunk dramatically as our size has grown, an unpleasant trend that is certain to continue." The italics are in the original. Note that he doesn't say "may" continue or is "likely" to continue. The operative word is "certain." I really don't see why anyone bothers reading the letter after this point. Buffett is guaranteeing that Berkshire is too big to succeed as well as it did in the old days. And as far as succeeding under a different guy is concerned -- no way.

 

Philanthropy. I think it's delightful that Buffett is giving away 50% of his Berkshire stock to charity and that he wrote an article in Fortune to challenge all the other fat cats of America to do likewise. Now what I'm wondering is this: Why? Why am I, a non-billionaire, being exposed to this appeal? Is he donating such large amounts of money out of the goodness of his heart or is there an element of showboating at work here? Or maybe a bit of each?

 

The reason I ask is that whenever I read about a very rich guy very ostensibly giving away money, I always think back to some pithy comments made by Maimonides, the ancient philosopher and ethicist, quite some time ago. In his "Eight Degrees of Charity," Maimonides wrote that the most noble form of charity, right below helping a guy get a job (not practical at the level of mega-giving) is "the one who gives (charity) to the poor, but does not know to whom he gives, nor does the recipient know his benefactor." In other words, what Buffett is doing is great -- but skipping the publicity could make it even better.

 

I'm realistic. I don't expect that the adulation directed at Warren Buffett is going to end any time soon. We in the media are fascinated with the super-rich. We're suckers for a ghostwritten home-spun anecdote from a billionaire in a cheap suit. In fairness, we're not entirely to blame. For a guy who supposedly doesn't care much for publicity, he sure seems to pull out all the stops to get it.

 

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2Comments
Nov 2, 2010 6:46AM
avatar
Buffet is a smart businessman, so I am not surprised by what he is doing. He uses effective and cheap advertising and this is consistent with the fact that he is enourmously cost concious. I am amazed that you still believe in the random walk. This theory has been created by payd academics. The big benefitor of this theory is wall street because it allows them to sell basically every company because following the theory, it does not matter what company you buy, as long as you are buyng all sorts of them!
Nov 2, 2010 3:26AM
avatar
What's Buffett buying? Who cares?

I certainly dont, considering his  BRK.A lost a major %.

And, his  BRK.B  moves up and down with the DOW.

 

No sign of independent positive intelligence!

 

About like Cramer and MSN!

 

Just look at their listing of  6 companies doing well.  There are many companies doing well, and they arent make money for their shareholders.

 

And, even though MSN shows some interesting news stories above the stocks I list,  when I try to find them its nigh impossible.  No link to the past posted stories, and the link they do use throws you into  a blackhole with so many options its useless!

 

Oh well,  guess MSN ignores even FEEDBACK...

 

HARRUMPH

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