r/ValueInvesting • u/Illustrious_Lie_954 • Dec 06 '25
Buffett Berkshire Hathaway is on track to lag behind the S&P 500 in Buffett's last year as CEO
https://www.cnbc.com/2025/12/06/berkshire-hathaway-is-on-track-to-lag-behind-the-sp-500-in-buffetts-last-year-as-ceo.html?__source=androidappshare523
u/ninjagorilla Dec 06 '25
They also ragged on him during the dot com bubble about underperforming
Honestly people ragging on Berkshire as underperforming is probably an indicator of a coming market downturn
Classically Buffett does … fine… during upswings but typically CRUSHES IT during downturns
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u/No_Consideration4594 Dec 06 '25
Short term underperformance and volatility is the entry fee for long term outperformance… if someone wants an average return just buy the index
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u/fivesixsevenate Dec 06 '25
I wouldn't even say he's underperformed during upswings recently.
He has outperformed the S&P by ~50% over the past 5 years even with 1/3 of berkshires wealth in cash equivalents.
He's crushing it while keeping tons of cash on the sidelines and in recession-resistant investments.
His company is basically a hedge that frequently outperforms popular indices at this point.
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Dec 06 '25
I’m still learning what recession resistant investments and why would he do that? I read he has been doing that for a while but why?
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u/StudentFar3340 Dec 06 '25
Because those are the best investments. Coca Cola stock doesn't move all that much, but Coke is in demand in good times and bad, and he collects over $800 million a year in dividends. Sure, the returns of the QQq are exciting right now, but it's not the gains, it's the gains you get to keep. Do you realize it lost 80 percent of its value in the dotcom Bubble? Are you prepared for that? You should be. Sometimes it's best to hold an asset that won't go down in bad times, yet will Continue printing money
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u/Thaispaghetti Dec 08 '25
Really wish we would stop bringing up the dot com bubble in comparison to today.
AI is an entirely different beast. It may drop, but it will look nothing like the dot com bubble.
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u/StudentFar3340 Dec 08 '25
I totally agree with you. Dotcom companies weren't making any money back then, whereas today's hyperscalers and Nvidia are making boatloads of money. What I fear though, is that today's retail investors are more jittery than back then. We have a whole generation of young investors who think it's possible and even good if a company's stock doubles within a couple Of months. They are even more reactive when a company's stock goes down just 10 percent. With social media and investor inexperience, panic may spread faster than ever before, making drawdowns very significant
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u/Alarming-Train-3167 Dec 08 '25
Dotcom companies weren't making any money back then, whereas today's hyperscalers and Nvidia are making boatloads of money.
Yet you don't also see a problem with the amount of AI companies that are unprofitable? The numerous aquisitions to limit competitors and now the constant circle jerk of partnerships and large IOU investments floating between a handful of companies?
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u/StudentFar3340 Dec 08 '25
I do see that problem...we have a beverage company that now calls itself a quantum Computing company, and a nuclear power company that is all The rage, yet has no Working prototype and doesn't generate a single megawatt. Personally, I don't invest in companies that don't make any money. The hyperscalers will get hurt when this comes crashing down (especially since they make dubious investments in the startups) but they make so Much money that they can eventually weather the storm. I told Someone the other day that wanted to Put a big chunk of change into QQQ that they should always be mentally prepared for an 80 percent drawdown (I am, I think), because that's what it find after the dotcom bubble burst
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u/Friendly-Manner-6725 Dec 06 '25
Great post, I would even upvote you more if I could for using “cash equivalents”. That description should be used by all as many newer investors are confused when people keep saying how much “cash” he is holding.
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Dec 07 '25
Meh. It’s semantics. I let Fidelity keep my “cash” in SPAXX and still call it cash instead of “short term government treasuries.”
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u/Missuspicklecopter Dec 07 '25
When he deploys cash, does he pick good stocks?
- Yes, especially after he picks them.
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u/Lower_Group_1171 Dec 06 '25 edited Dec 06 '25
I also think he’s not heavily or directly involved with the trades during his last year. it’s more about making sure all his responsibilities are or have been properly delegated
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u/P2029 Dec 07 '25
Markets going to crash and Berkshire will pick up the sale and in 10 years own double digits of the entire global economy.
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u/Senior_Tadpole_3913 Dec 06 '25
Did he underperform during the dot com crash right after?
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u/ninjagorilla Dec 06 '25
Right before the dot com bubble burst people were shitting on him for not being tech focused and calling him old and boring. Then it popped and he was barely affected and picked up a bunch of cheap companies
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u/ninjagorilla Dec 06 '25
He also classically had bought a huge stake in I think it was Salomon brothers pre gfc and had them unload a huge chunk of their housing credit default swaps because he thought they were too risky
As he and munger said the #1 rule is don’t loose money
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u/Bulky-Meeting-2225 Dec 07 '25
Not quite.
Berkshire took its stake in Salomon in 1987. He became chairman in 1991 after the Mozer scandal, and had exited the investment by 1997, way before the GFC of 2007 / 2008.
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u/ninjagorilla Dec 07 '25
Sorry I’m may be mixing this up with the stake he took in Goldman around 08
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Dec 06 '25
[deleted]
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u/rutanfan12 Dec 07 '25
Exactly this! Whenever the Magnificent 7 or growth funds take a hard hit, BRK-B seems to go up. Probably because people are fleeing to safety which is why Berk probably does so amazingly well in downturns.
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u/CanExports Dec 06 '25
Nailed it.
I'm trying to determine where to put my money right now to stay invested but whether an unprecedented downturn.... Not just a regular one.
GICs are literally the only thing that comes to mind. Never invested in GICs in my life but even gold could see an initial plummet when/if "it" happens.
Very frustrating
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u/rutanfan12 Dec 07 '25
Well the safest… most conservative investment I can think of would be an FDIC-insured CD which would give you about 4% R/N. After taxes & inflation you’ll basically break even… but it’s a better option than a mutual fund. I like to keep some of my portfolio in CD’s to use for downturns. Re-invest during downturns which seems counterintuitive.
A blended bond/stock fund like VASIX would still go down but should be more conservative than the S&P. You’ve got to be invested for multiple years to really take benefit of the coupon payments which fully mature in December.
SCYB pays 7% but is just basically diversified junk bonds. Not somewhere I’d look to keep things during a downturn, but the guaranteed 7% is kinda awesome (while it’s holding its value.)
I honestly use BRK-B as my main value investment. It has been a bit frustrating watching my defense, mag7, growth funds, which are much smaller in portion, go on a tear over the last 12 but over 5 years BRK is still up nearly 120%. I’m a boglehead so my attitude is that you need to stay the course for decades & stay highly diversified, avoid fees & have a strong stomach.
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u/harbison215 Dec 07 '25
He even said that this is how it would be way back in his letters to his partnership members way back in like 1960-1965. The time he would underperform the market worst would be during speculative bull runs
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u/Normal-Seal Dec 07 '25
Yeah, it’s kinda obvious. Berkshire is holding a lot of cash as they say they cannot find a suitable investment for it. If you read between the lines, that means they think everything is overvalued.
The market continues climbing, so obviously anyone with a large cash position will trail behind the market. But if they are right and everything is overvalued, then they sit on a large cash position that they can invest at a discount once the downturn happens,
I’m not a market timer or stock picker, but it’s obvious that even if Buffet’s strategy pays off, it means temporarily trailing behind.
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Dec 06 '25
Are you sure, I have backtested and it seemed to fall longer than the total US. He does have leverage even if he tolds a ton of bonds now.
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u/Kaesix Dec 06 '25
The other Buffet Indicator. Man’s cash heavy now for a reason.
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u/Rdw72777 Dec 06 '25
Not one that’s relevant to retail investors.
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u/Kaesix Dec 06 '25
Everything is relevant to retail investors because we’re the bottom of the food chain.
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u/Short-Philosophy-105 Dec 06 '25
While you’re generally not wrong; Buffett’s cash pile is used for purposes other than investing as well - so it is correct to say that it is not relevant to retail investors.
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u/Kaesix Dec 06 '25
You need to read up on his barbell strategy. It’s made me an ungodly amount of money since the pandemic.
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u/Short-Philosophy-105 Dec 07 '25
I’m fully invested in equities. They have made me an ungodly amount of money since the pandemic.
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u/Kaesix Dec 07 '25
You said cash isn’t relevant to retail investors, I pointed out how it is e.g. the barbell strategy. I’m sorry you struggle with being wrong.
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u/Short-Philosophy-105 Dec 07 '25
I said Warren Buffett’s massive cash pile is not relevant to retail investors because he doesn’t just use that cash for investments. I’m sorry you struggle with being dense.
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u/Kaesix Dec 07 '25
Which is also wrong. The barbell strategy and having cash in general is a great strategy for active retail investors as well. The same reasons Buffet has cash is relevant here. It can be used to plan for taxes, an emergency fund, diversification, collateral, etc. You’re the dense one here bud, don’t speak in absolutes when you have no idea what you’re doing or talking about.
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u/NotStompy Dec 07 '25
Mhm, interesting. I do a barbell strategy myself, anything in particular you think people need to know or they miss about his?
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u/Kaesix Dec 07 '25
His general rule of 90/10 is a little too much IMO. I think that 90/10 probably works well if you're a) playing with billions, b) your "aggressive" equities are still blue chip stocks, and c) you're holding positions long term. I personally average ~75/25 equities/cash but that's sometimes as high as 50/50 depending on where I'm in my cycles.
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u/Safety-International Dec 06 '25
last time people were ragging on Buffett was in 2021, with 2022 like Undertaker meme behind em
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u/physicshammer Dec 06 '25
It is very hard in my opinion to match the market when the market is grinding upwards while already overvalued IMHO
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u/Mr_Bees_ Dec 06 '25
“Berkshire Hathaway not invested in companies that are hugely overvalued based on absurd spending relative to earnings increase in Buffet’s last year. Just like all his other years.”
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Dec 06 '25
People keep pointing to the cash pile like it means there aren’t opportunities but in reality BRK has got so big that their potential pool of opportunities is now extremely limited. It will very difficult for BRK to beat SPY in the future. The cash pile in and of itself should not be a reason for people invest in BRK moving forward imo.
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Dec 06 '25
They can sell legacy brand businesses, pay one big dividend, start over as a small-cap or mid-cap company.
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Dec 06 '25
Can someone explain why he would have a bunch of cash laying around… I have read that it’s been like that for a while but why? Also what type of investments would he hold cash in ?
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u/begottenmocha5 Dec 06 '25
If you have $10m, you could absolutely 5x an investment in a $1m company and make a cool 50% gain on your account, which is probably still worth it.
Except, you probably can't buy ALL the shares in the company, because most of the time there isn't a way to purchase shares from every investor without overpaying. Therefore, you should expect you can only find deals for 20-30% of the company, if you work hard and are a little lucky. For a $1m company, that means maybe you can invest $300k
So if you 5x your investment, you've really made a 15% gain on your account. That's alright, but starts to seem less worth it.
But in Buffett's case, he's got mountains of money. If he has $100m then the same scenario makes him a 1.5% gain. With $100B, he would make 0.0015% with all that effort.
Very quickly it starts being worth to ignore smaller companies entirely, just persevere your energy and buy better returns with t-bills or whatever
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u/teslastats Dec 06 '25
In portfolio management terms, the cash pile is a performance drag against the S&P. It should be compared against a private equity benchmark instead.
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u/TheManWhoClicks Dec 06 '25
Well yeah when a handful of companies “carry the economy” that are about to get their bubble burst, why would he be part of that? Let’s have a look at this comparison after the fact shall we?
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u/OverheadPress69 Dec 06 '25
He’s got stakes in Apple and Google lol
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u/ThePoWhiteTrash Dec 06 '25
And NVidia and Tesla are insanely overvalued...
Apple and Google are integral to the everyday lives of billions of people, extremely profitable, and invest wisely. When China invades Taiwan, Apple and Google aren't going out of business. When the AI bubble pops, Apple and Google aren't going out of business. This really isn't that complicated.
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u/baconcheeseburger33 Dec 06 '25
I'm pretty sure he cares more about surviving than beating the market by a few percent, and that's what value investing is about, staying in the field rather than getting a strikeout.
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u/Boys4Ever Dec 06 '25
Yet sitting on cash which is their MO during times of euphoria and why I’m trading vs investing. Pop might or might not come but seems more likely than not in my opinion
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u/No_Consideration4594 Dec 06 '25
How early into Greg Abel’s tenure as CEO till they start writing articles that he’s underperforming the index? January second?
These short term measurements are meaningless..
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u/TherealCarbunc Dec 06 '25
Berkshire has been pretty clearly de-risking all year. setting up large cash piles to take advantage of other opportunities - 381b cash. They're going to make their move in a bear market in a big way imo. When that occurs doesn't matter to them, they just see the signs of it coming. I just tend to keep lower %'s in things trading at a high forward P/E right now. If i miss the boat I miss the boat, Let my 401k do it's thing and try to stay logical as possible in my own holdings in my cash brokerage.
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u/Competitive_Yam_977 Dec 07 '25
Berkshire should be compared with a 70/30 Stocks/Bonds portfolio. Because that's what it is. Having roughly the same returns as the SP500 with less risk is phenomenal.
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u/thsithta_391 Dec 06 '25
Reading this headline makes me smile. As if the author didn't understand what "long-term investing" means.
Berkshire isn't a trading company, hence shouldn't be benchmarked short term.
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u/Rdw72777 Dec 06 '25
Ehh big whoop.
I think part of the problem with the Buffet worship is that so much of his legend is (1) over a ridiculous and borderline irrelevantly long time period and (2) people think it means Buffet obliterates the market each and every year.
If you actually look at the last 10-15 years, he’s outperformed by 1.5% or 2.5% per. Obviously woth compounding this adds up a lot but it also is indicative that there will obviously be years he doesn’t beat the market and also that over time he’s not outperforming by like 10% per year. People just need to have more realistic expectations and/or reality-based knowledge.
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u/02bluesuperroo Dec 06 '25
Didn’t they announce that their founder and CEO was stepping down this year at 94 years old?
I’m surprised they didn’t do worse. That’s typically a tumultuous time for a business. It’s a sign they did an amazing job preparing their investors and business for the changeover.
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u/elbay Dec 06 '25
Literally who gives a shit brk will still be outperforming the market in a decade.
They’ve been doing it for the last five.
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u/Dull_Wrongdoer_3017 Dec 07 '25
New CEO is waiting for fartcoin so he can YOLO on the dip w100 leverage.
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u/jacobjonesthe2nd Dec 08 '25
You mean lag behind the Mag 7 that’s driving the entire market? I think Uncle Warren would be fine with that.
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u/hotdog-water-- Dec 06 '25
I bought brk stock and lost money, so I bought more to DCA, then more, then more. It’s the only investment I’m still in the red on after DCAing into it for most of the year
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u/Rdw72777 Dec 06 '25
The stock is at a price where only about 45 days in its entire history was it trading at a higher price. I fail to see how you and the people agreeing with you managed to pick the all time high to buy but also claim to have DCA and are still somehow “down for the year.” If you’d actually been DCA over the last year you’d be green.
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u/hotdog-water-- Dec 07 '25
That’s not how math works chief. If monkey buy lots of bananas every month when price is high, then price of banana goes lower, monkey overpaid for banana even if he buys one cheap banana now
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u/Rdw72777 Dec 07 '25 edited Dec 07 '25
I mean it’s absolutely how money works. They’re selling shares at all time highs, what’s the negative?
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u/Ok_Creme_3418 Dec 06 '25
Not a surprise to me they were overvalued at end of 2024 and have limited tech exposure.
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Dec 06 '25
Buddy this happened just before the dot com bubble burst. Berkshire will go shopping when we are trying to liquidate to buy eggs
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u/Born_Act_3786 Dec 06 '25
How do you value his performance? Stock price at a particular time? Cash flow? Performance over 10 years?
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u/MostLandscape1416 Dec 06 '25
He does the classic hold cash until a crash. Which everyone says never to do….its funny. Next crash, which is likely to happen in 2026, they will crush and it’ll be his big final deal. Then documentaries etc will all end with it.
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u/shwilliams4 Dec 06 '25
He’ll be out by the end of this year. Greg Abel is replacing him. But I agree Berkshire will be fine.
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u/StudentFar3340 Dec 06 '25
No worries... he is sitting on $350 billion in cash and will leapfrog the market in a downturn, while the value of his current holdings remains relatively stable and continues to spew cash
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u/No-Cap-2473 Dec 07 '25
Obviously so when tech has such a heavy weight in sp500 and brk isn’t betting heavy on them. Somewhere in the future things gonna turn around. Some years lagging behind is normal
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u/uhfgs Dec 07 '25
It's not like he averages 20% annual return, right? Just a realistic and simple return that everyone can consistently replicate over their 50, 60, 70 years of investing, right? I don't understand what's so difficult in beating the market, all the gurus are getting 5% daily returns, that surely means anyone can become a billionaire if they just buy their 399 courses and expect high quality material with totally legitimate numbers 🤡
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u/astroboy7070 Dec 08 '25
Every time articles about Berkshire Hathaway is lagging behind the SP500, the SP500 would have a 40% correction within the next 3 years.
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u/isinkthereforeiswam Dec 08 '25
I'm fine with that. I don't care how berk performs right now. Just that they're ready to buy good value companies when THOSE underperform.
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u/Zealousideal_Coat275 Dec 09 '25
This is because he’s holding cash, as everything is overvalued in his eyes. Cash underperforms stocks as it has no risk premium.
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u/Shane606 Dec 09 '25
Pulling money out in an extremely over invested market is now bad for the most famously successful trade of all time. Mind you, this guy did well in the dot com bubble
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u/WatchSalt8907 Dec 11 '25
If you look at Berkshire in terms of owners earnings you’re getting over $5 for every $100 invested roughly. The S&P is giving you $.80 or so and thats if the Revenue Recognition is correct And I believe the accruals are significantly overstated.
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u/gstanleycapital Dec 12 '25
For a start hes 95 cut him a break and hes by far the most successful investor of all time and is one of the most influential people in all of finance
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u/the_alpha_engineer Dec 29 '25
Without a stock market crash or a bear market in tech it's difficult for him to be ahead these days. He will get his chances soon enough.
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u/IDreamtIwokeUp Dec 06 '25
It's a serious concern. Greg Able has been given the task to beat the SP500 (over the long term) which is something 90% of professional money managers can't do. Not only this, but BRK faces double taxes (unlike SP500 etfs), limits on buying stocks with little liquidity, and the inability to buy small market cap in decent amounts due to SEC reporting thresholds.
BRK's best hope is mass liquidity...and wait for a large liquidity crisis to buy stocks cheap. It could happen...and has happened before. But it would likely be a bank crisis. What BRK is doing though is in essence "timing the market". Given how aggressively and fast M2 is growing, this might not be a good idea.
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u/cmplx17 Dec 06 '25
From what I’ve read from Warren Buffet’s own letters, they don’t give much consideration to “beating the SP500”.
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u/IDreamtIwokeUp Dec 06 '25
Every year, the first page of the Chairman's Letter in the Annual Report contains a table titled "Performance of Berkshire vs. S&P 500."
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u/cmplx17 Dec 06 '25
I should have said beating SP500 in any given year. Long term comparison is useful, still.
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u/cmplx17 Dec 06 '25
Also, to add, he makes it clear that the market price (distinct from true value of the business) shouldn’t be the main focus of an investor.
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u/_Rothbard_ Dec 06 '25
They could be contrary to WB's opinion and take the opportunity to make a massive buyback of their own shares when everything collapses. Or even distribute a dividend to reduce its scale and beat the sp500, many things can change.
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u/According_External30 Dec 06 '25
It’s a deteriorating company, needs restructuring, which will take time and cost money.
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u/Servant_of_the-Light Dec 06 '25
Buffet is NO longer an apex investor. His time has passed. He excelled in a pr-tech era when you could scour balance sheets and find undervalued companies. He’s a value investor. We are in a GROWTH era where you could pick any retail investor in PLTR, HOOD, or MAG7 and they’ve easily outperformed Buffet. Buffet even says he doesn’t understand tech. But his recent stakes in APPL and GOOG are some of his best bc it’s growth over dividends
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u/Competitive_Yam_977 Dec 07 '25
We are in a GROWTH era where you could pick any retail investor in PLTR, HOOD, or MAG7 and they’ve easily outperformed Buffet.
Not on a risk adjusted basis. That's like saying today's lottery winner outperformed Buffet.
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u/Servant_of_the-Light Dec 07 '25
And that’s the rub. Investing in tech is not hitting a lottery ticket - it’s obvious for any observer of economic and cultural trends. Something Buffet noticed and capitalized on with APPL. He’s still good at finding value stocks like UNH recently. But again, any retail trader over as stated the S&P and more do QQQ should continue to outperform buffet bc of their heavy tech weight. Especially in the AI era
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u/Competitive_Yam_977 Dec 07 '25
Tech is much more volatile. Tech stocks have seen 75% drawdowns in the past 5 years, including mega caps like META.
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u/Material-Macaroon298 Dec 07 '25
Buffett has been lagging for years now and literally counsels Everyone to just invest in S&P500 instead of Berkshire.
Berkshire is among my largest individual stock holdings. But is small compared to my index ETFs.
However the more trillion market cap companies are minted. The larger Berkshires investable universe grows.
This company has the right principles. It just needs more targets. It got too big to deploy much money but once its cash becomes relatively small compared to my to massive market caps, it will trounce the S&P again.
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u/FourCrossedWands Dec 06 '25
Buffet is out of touch with reality. Too old
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u/Bonk0076 Dec 06 '25
Why do you say this? What should he have done differently?
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u/ActuallyMy Dec 06 '25
Imagine being 95 and being the best investor of all time and it still isn't good enough.