It may surprise some investors to learn that despite Buffett’s prowess and mammoth lifetime outperformance, Berkshire is trailing the S&P 500 over the last one, five, 10 and 15 years. To be fair to Buffett, a lot of that is due to stock investors’ continued preference for hot growth stocks, which the classic value investor like Buffett has largely avoided. These include names such as Microsoft, Amazon and Alphabet.
Looking at the numbers, $1,000 invested in Berkshire Hathaway on May 1, 2009 would now be worth $3,568. That same $1,000 invested in the S&P 500 would be worth $4,106 over the last 10 years.
Growth equities have seen remarkable outperformance over the broader market during the last five years, with the Vanguard Growth ETF up 185% versus the S&P 500′s 173% gain on an indexed basis.
Meanwhile, Berkshire’s management team oversees a private portfolio of companies described by the CEO as a “Niagara” of cash generation. And Berkshire has stock holdings in big, value companies like Coca-Cola, Bank of America and Verizon. These types of stocks, Buffett has said, help guarantee earnings for years to come through persistent dividends and stable balance sheets.
But the rest of Wall Street hasn’t been interested in hunting for value amid consumer staples companies or big banks, opting instead for flashy acronyms stocks such as the FANGs.
And some of those value names for Buffett have turned into traps, including underperforming bank stocks and Kraft Heinz, one of Berkshire’s largest holdings. The stock of the packaged food giant, whose products include Heinz Tomato Ketchup, Jell-O and Kraft Macaroni & Cheese, plunged more than 27% in a single session earlier this year.