WARREN BUFFETT’S POOR RISK ADJUSTED RETURNS
Here’s something I’d never seen done before – an analysis of Warren Buffett’s risk adjusted returns. Insider Monkey has run an interesting analysis on the Buffett portfolio calculating his alpha since 1977. The conclusion – as Buffett has aged and grown in size his returns have become substantially worse on a risk adjusted basis:
“Warren Buffett had a phenomenal annual alpha of 19% between 1956 and 1968. Our current analysis shows that his alpha was more than 30% between 1977 and 1981. During the 80′s and 90′s, his annual alpha declined but was still better than 12%. For the ten years leading to mid-2003, his annual alpha stayed around 12% per year. Since then, it started a steep decline; by the end of 2004 it was (still a respectable) 6% per year. Between 2005 and 2008 Buffett’s alpha averaged only 3% per year. Finally, in the ten years ending in 2009, it went virtually to zero. (For regression results and Buffett’s style drift, visit Insider Monkey)”
Is Warren Buffett another casualty of the tough investment environment? Looks like we can chalk this up under the “many myths of Warren Buffett” file.
Source: Insider Monkey
Imagine what his risk adjusted returns would’ve been if the taxpayer did not bail his fascist a** out!
It would have ruined his reputation. Have you read TPC’s letter from WB to Paulson? It should be called the Buffett Bailout. It went down EXACTLY as WB said it should.
Charlie says: Me and Buffy need another TARP bailout to paper-over all that mortgage fraud – NOW YOU STUPID TAXPAYERS JUST SUCK IT UP AND COPE!.
While the author of this article correctly points out (as does Warren in his letter to stockholders and at his annual shareholders’ meeting) that due to the size of his portfolio it is extremely difficult to outperform the S&P 500 because when he makes a meaningful investment, Berkshire is so big that it “moves the market”.
How do you create Alpha when you are significant part of the market in the first place?
NOTE: Beneath the folksy persona of Warren Buffett belies the heart and soul of one of the world’s greatest and most whiley (hedge fund) investment managers. This is not in itself a bad thing. Warren Buffett – unlike most of Wall Street’s operators – has made more average investors multi-millionaires than any I have seen before. And he has committed half his wealth to the Gates Charity Foundation.
The problem is WB wealth has come from the taxpayers. So, essentially he’s deciding on who gets taxpayer’s charity. I prefer to decide for myself who I’m donating my money too.
At best WB is a crony capitalist at worse he is a fascist pig!
Then throw out the FOOLS we have in Washington, DC, and keep doing so until we get ones who will serve the people instead of themselves and outside interests. Stop whining and moaning and then keep voting in the same set of fools!
I am very pleased with the thought and don’t feel like adding anything in it.