Warren Buffett's Greatest Winning Streak Just Came to an End

Berkshire Hathaway stock just beat the market for the second year in a row. Here's why Warren Buffett isn't happy.

Jan 4, 2014 at 11:19AM

As 2013 came to a close, Warren Buffett fans around the world cheered as Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B) 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.

Berkshire Hathaway stock Total Return Price Chart

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.

Here's how to harness even more of Buffett's wisdom 
Warren Buffett has made billions through his investing and he wants you to be able to invest like him. Through the years, Buffett has offered up investing tips to shareholders of Berkshire Hathaway. Now you can tap into the best of Warren Buffett's wisdom in a new special report from The Motley Fool. Click here now for a free copy of this invaluable report.

Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway. The Motley Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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