Friday, January 30, 2009

Is Buffett Bashing Bullish?

In a new article by the Globe and Mail, David Berman asks a good question: "Is all the Buffett bashing these days bullish?" He notes for starters what happened the last time this was prevalent (in 1999), gives some facts recounting what's happened at Berkshire of late, and in response to a recent article by Doug Kass, notes:
What's interesting is that, by Barron's estimate, Mr. Buffett's stock picks beat the S&P 500 in 2008 by an impressive 13 percentage points (though Mr. Buffett's holdings and the S&P 500 both fell). The criticism, then, comes from the performance so far this year. Mr. Buffett, a long-long-term investor, would probably be appalled to learn that his investing prowess is being called into question based on just 17 trading days.
He didn't point out the illogic of Kass calling Buffett's strategy "stale" at the same time he accuses him of "style drift"--but it's a good article worth reading in any case.

1 comment:

  1. Buffett has seemed to have gotten caught flat-footed by the credit crisis/real estate bust/financial crisis. He owned 20% of Moody's while it was slapping triple-A ratings on CDOs comprised of subprime mortgages; he has ridden down a number of his holdings (both wholly-owned and publicly-traded) that are linked to housing; he didn't seem to suspect the mess BofA was taking on with its acquisitions of CountryWide and Merrill Lynch (or, if he did, he held on to his BofA stock anyway), etc.

    Perhaps there are some common threads here that relate to Buffett's strategy? For example, Buffett has long been attracted to businesses with low amounts of tangible capital, which has led him to large positions in financials; he also has an attraction to simple businesses, which led him to a lot of housing-related businesses (sheet rock, furniture, paint, carpeting); he prizes moats, when the cozy oligopoly that comprised Moody's moat may have encouraged its lax underwriting standards.