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Can Warren Buffett Outperform the Markets in 2019?

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Warren Buffett

Berkshire Hathaway (BRK-B) outperformed the S&P 500 (SPY) in 2018. Warren Buffett, the company’s chairman, has earned his reputation by beating the market over the long term. Looking at the data from Berkshire Hathaway’s annual report, the company delivered annualized returns of 20.09% between 1965 and 2017. The S&P 500 (SPY) returned 9.9% during this period. Berkshire Hathaway’s book value rose 19.1% during this period.

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Long-term performance

Currently, the data look astonishing. Berkshire Hathaway’s stock price has risen more than twice what the S&P 500 has risen. Looking at absolute returns, Berkshire Hathaway returned an absolute 2,404,748% between 1964 and 2017, while the S&P 500 delivered 15,508%. The returns show the power of compounding, which Buffett has discussed frequently.

Broader markets

Over the last five decades, there have been instances when Berkshire Hathaway has underperformed the broader markets. In the last decade, Berkshire Hathaway lost 12.5% in 2015, while the S&P 500 gained 1.4%. In 2009, while the S&P 500 rose 26.5%, Berkshire Hathaway stock rose 2.7%. Barring a few years of underperformance, Buffett has managed to beat the S&P 500 on most occasions. There have been some incredible investments and relatively modest investments like General Electric (GE). Buffett has admitted missing out on companies like Amazon (AMZN) and Alphabet (GOOG).

In this series, we’ll see how Berkshire Hathaway has performed in the last few years. We’ll discuss some of the factors that could drive Berkshire Hathaway’s performance in 2019. First, we’ll see whether Buffett’s ability to beat the markets has eroded over the years.

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