#238: How Good Is Buffett?

Michael Berman, Ph.D.
February 26, 2025

S2N Spotlight

If you go back 45 years, Buffett’s company Berkshire Hathaway smashes the S&P 500 total return index. It is not even close. The question whether he is actually the greatest is more profound than you may think. What if he was the greatest from 45 years but not so over the last few decades? Maybe since the early days he is just average and enjoying the benefits of compounding from outperforming early.

Over the past 20 years Buffett has just beaten the index.

Over the past 10 years Buffett has slightly underperformed the index.

Over the last 5 years Buffett is outperforming, and over the last year the index has outperformed.

One last point before I wrap it up.

In summary, I think you have to acknowledge Warren Buffett and his Berkshire Hathaway team are probably amongst the greatest investors out there. Yes, he has hardly outperformed in the last 20 years, but he is a value investor that should not be judged over shorter time frames. He has built up a massive pile of cash and I think this strategic move is going to enshrine his legacy as the greatest of all-time should the markets correct like I think they will and he puts his mountain of cash to work.

S2N Observations

The S&P 500 had a drop of -1.71% on Friday. As you can see below, it has been a pretty normal pattern of a drop of -1.70% every 50 odd days. I think this visualisation helps show how unusual the bull market from 2023 through to 2024 was with 350 days without a drop of -1.70%.