As 2013 came to a close, Warren Buffett fans around the world cheered as Berkshire Hathaway (BRK.A 0.65%) (BRK.B 0.79%) stock edged out the S&P 500 for the second year in a row.
That's not to say the S&P 500 didn't put up a fight; when all was said and done last year, the broader index rose a whopping 29.6%, or 32.4% including dividends. Even so, Class A shares of Berkshire Hathaway managed to beat both numbers, skyrocketing 32.7% in 2013.
Now that's all well and good, and Berkshire shareholders have every right to enjoy those gains.
However, I think 2013 will ultimately prove a bittersweet year for the Oracle of Omaha.
Here's why Buffett isn't happy
Why? Because Warren Buffett doesn't measure the performance of his company based on its share price.
To the contrary, Buffett knows the best way to gauge the worth of Berkshire Hathaway is by calculating its book value per share. That's why, every year for the past several decades, Buffett's widely anticipated annual letters to shareholders have led off with a summary of the metric. Heck, in 2000, Buffett began prefacing each letter with a simple table comparing the change in Berkshire's per-share book value to the S&P 500's total return.
And that got me thinking about something Buffett wrote in his most recent letter, which was released on March 1, 2013. Specifically, after lamenting 2012 as the ninth time in 48 years Berkshire's percentage book value gains had lagged the S&P -- while also noting the index had returned at least 15% in eight of those years -- Buffett added,
To date, we've never had a five-year period of underperformance, having managed 43 times to surpass the S&P over such a stretch. [...] But the S&P has now had gains in each of the last four years, outpacing us over that period. If the market continues to advance in 2013, our streak of five-year wins will end.
Unfortunately for Buffett, the S&P continued to roar higher from there, gaining another 16.5% between March 1 and the end of the year. As a result, and if Buffett's own ever-reliable opinion is any indication, it looks like Berkshire Hathaway's incredible 43-win streak over rolling five-year periods has officially been broken.
Of course, I wouldn't go shedding any tears for Buffett, either. Given Berkshire's enormous size today, he understands all too well the challenge of maintaining the stellar growth of days' past.
And besides, the man's net worth grew by roughly $12.7 billion in 2013, the absurdity of which can only be rivaled by the fact that he plans to give nearly all of it away by the time he dies.
But in the end, something tells me for all his money, this particular winning streak is one he cherished more than most.
