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Warren Buffett Lags, U.S. Stocks Recover from Crash


Sep. 3 2020, Updated 3:27 p.m. ET

  • Warren Buffett, Berkshire Hathaway’s chairman, missed out on the U.S. stock market crash in the first quarter. While the S&P 500 has turned positive for the year, Berkshire Hathaway shares are still down 15.1 percent.
  • Several analysts have criticized Buffett for missing out on the U.S. stock market crash.
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Warren Buffett's performance

Warren Buffett, arguably the best investor of all time, has struggled to beat the markets since the beginning of 2019. Berkshire Hathaway shares underperformed the S&P 500 by 20 percent in 2019 and by a similar amount in the first half of 2020. While the stock has risen 7.7 percent in July, it has fallen 15.1 percent for the year. Berkshire Hathaway trails the S&P 500, which has turned positive for the year.

Berkshire Hathaway lags, markets recover from the crash

Several analysts have been critical of Warren Buffett for his inability to capitalize on the U.S. stock market crash in the first quarter. Berkshire Hathaway has a massive cash pile, which has increased consistently over many quarters. The company sold more stocks than it brought in the first quarter. Earlier this month, Berkshire Hathaway announced the acquisition of Dominion Energy’s natural gas assets for $4 billion with an assumption of another $5.7 billion in debt. However, the deal hardly moved the needle for the company, which was sitting on $137 billion in cash at the end of the first quarter.

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Warren Buffett and value investing

Some of Warren Buffett’s underperformance can be explained by the fact that value investing strategies have underperformed growth investing. Also, Berkshire Hathaway’s portfolio is overweight on banking stocks, which have been among the worst performers this year. To add to the woes, Berkshire Hathaway only has Apple and Amazon from the technology sector in its portfolio. U.S. tech and growth stocks have led the market higher. The July Bank of America Global Fund Manager Survey showed that U.S. tech and growth stocks are the most crowded trade ever.

Warren Buffett also missed the U.S. stock market crash in the fourth quarter of 2018. These buying opportunities do not come along very often. Missing these opportunities has a negative impact on investors’ performance. After the massive underperformance over the last two years, Berkshire Hathaway stock has been trailing the S&P 500 since the beginning of 2009.


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