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Analyzing Warren Buffett’s Underperformance in the Past

Mohit Oberoi, CFA - Author

Jul. 24 2020, Updated 1:32 p.m. ET

  • Berkshire Hathaway’s (NYSE:BRK.B) chairman, Warren Buffett, has been experiencing a rough patch based on his performance compared to the S&P 500 (NYSEARCA:SPY).
  • Despite the recent underperformance, he has also underperformed the S&P 500 for extended periods in the past.
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Warren Buffett’s underperformance

Warren Buffett seems to be in a rough patch. Berkshire Hathaway underperformed the S&P 500 by over 20% in 2019 and the first half of 2020—a massive underperformance. Berkshire Hathaway’s returns have been trailing the S&P 500 since the beginning of 2009. Previously, I discussed the various reasons behind Berkshire Hathaway’s underperformance versus the S&P 500.

Berkshire Hathaway versus the S&P 500

Warren Buffett has experienced rough patches in the past. Berkshire Hathaway underperformed the S&P 500 by 23.8% in 2009. The S&P 500’s returns for all of the periods are with the dividends. The stock’s returns trailed the S&P 500 between 2003 and 2005. At that time, the stock trailed the S&P 500 for three consecutive years.

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Going back to the 1990s, Warren Buffett underperformed the S&P 500 by 20.0%, 16.8%, and 40.9% in 1990, 1996, and 1999. The last year of the decade hasn’t been very pleasant for Buffett. To learn more, read How Did Warren Buffett End the Last Decade.

In the 1980s, the company underperformed the S&P 500 for three years. All of the underperformance was by single digits.

Warren Buffett’s long-term performance

Between 1965 and 1980, Buffett didn’t beat the S&P 500 on four occasions. Amid the oil price shock in the 1970s, US stock markets fell sharply. Meanwhile, Berkshire Hathaway had its best year in 1976. The company outperformed the S&P 500 by a whopping 105% in 1976.

Looking at Berkshire Hathaway’s returns between 1965 and 2019, it has grown at a CAGR of 20.3% compared to the S&P 500’s CAGR of 10.0%. To put that in absolute numbers, Berkshire Hathaway stock rose 2,744,062% during that period compared to 19,784% returns from the S&P 500.

Most of Buffett’s underperformance was in the last century. Read Analyzing Warren Buffett’s Investments in the 21st Century to learn more.


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