Buffett bows out
Buffett bows out
The sun is setting on a remarkable reign in Omaha: Warren Buffett, the 'Oracle,' often dubbed the greatest and certainly the most famous investor of all time, announced earlier this month at Berkshire Hathaway's annual investment conference, his decision to step down as CEO at the end of the year. While it should not be a surprise that a 94-year-old is retiring, to Wall Street, this is the investment equivalent of The Beatles breaking up. Buffett is viewed as somewhat of a financial celebrity and has amassed thousands of devotees, largely due to his record of outperforming the market spanning across six decades. Since he took over Berkshire Hathaway in 1964, the 60-year share price return amounts to 5,502,284%. Annualised, this equates to a return of nearly 20%, which is almost double that of the S&P over the same period. Such is the length of Buffett’s reign; his investment track record goes back further than Bloomberg can chart but even looking at a shorter period (still nearly 40 years) his returns are exceptional.
S&P 500 vs Berkshire Hathaway Cumulative Performance
Source: Artorius, Bloomberg
Past performance is no guide to future performance.
Warren who?
Berkshire Hathaway was originally a struggling textile company when Buffett joined. Fast forward to now, Berkshire, although a conglomerate that encapsulates a plethora of individual operating companies engaged in a variety of sectors, could just as easily be considered a giant investment company. It is currently the United States’ sixth largest company by market capitalisation.
Buffett used the 60-year anniversary of Berkshire’s annual meeting to announce he would step down as chief executive, delivering the news in his usual casual manner during the final five minutes after taking questions for nearly four hours. As recently as 1981, only 22 people attended. Now the meetings attract tens of thousands from around the world, which has become as much a festival as an investor meeting. The weekend dubbed ‘Woodstock for Capitalists’ features a multi-day shopping event featuring Berkshire’s portfolio companies, a picnic and a 5k run.
As the investment world comes to terms with the legendary investor retiring, we look at five things that investors can learn from Buffett’s career.
*All quotes shown below are taken from Warren Buffet during this year’s Berkshire annual investment conference.
Moats and Monopolies
“The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.”
Buffett is synonymous with a long-term buy and hold investment philosophy. He typically made sizeable and infrequent investments and is lauded not only for his public stock-picking prowess, but also for how long he held the investments. However, a lot of Buffett’s investments have one key similarity: wide economic moats. The analogy relates to the moats that would surround medieval castles and act as a barrier of protection. In investment terms, these are companies and industries that exhibit high barriers to entry. And the importance was not simply to identify the competitive advantage of any given company, but the durability of that advantage.
This philosophy can be seen throughout the Berkshire portfolio. From companies such as Coca-Cola, Gillette and Apple, these can all be seen as bullet proof brands with market positions and intellectual capital strong enough to fend off any budding market participants hoping to steal a large portion of their market share. The trio of payment card companies in the portfolio, Visa, Mastercard and American Express, form an oligopolistic industry surrounded by a strong moat that competitors have struggled to breach. Many of these companies were bought decades ago and held ever since.
Buffett’s most famous investment over the past decade and his current largest holding is Apple, to which he jestingly commented to investors in this month’s annual conference that Tim Cook (Apple’s CEO) has made Berkshire a lot more money than he’s ever made. Apple at the time of Berkshire’s investment (2016) was the biggest company in the US so was no secret to investors. Despite no real breakthroughs in the years since to match the innovation of the iPhone or Macintosh, this represents a successful calculation that Apple had successfully established a dominant position in a highly competitive (and lucrative) market.
An April Fool’s joke circulated this year that Buffet was buying Telsa for $1 trillion. When prompted on the topic, Buffett replied that he didn’t believe Tesla could maintain a dominant position in electric vehicles and instead holds Chinese rival EV maker BYD in the portfolio. This may point to the difference in mindset between Musk, who views himself as an inventor, and Buffett, an investor who is looking to capitalise and profit from companies whose strategy prioritises fending off any potential competition.
Research rewards
Buffett’s market beating career can also be attributed to meticulously devouring thousands of financial statements to deeply understand companies and markets. Long before the digital age, when the internet was still a distant concept, firms like Moody’s and Standard & Poor’s published physical 'manuals' listing the financial data of all publicly traded companies in the nation. Buffett is known for his devotion to reading these books, page by page, for decades.
“It’s amazing what you can find when you just turn the page… I would say that turning every page is one important ingredient to bring to the investment field. Very few people do turn every page. The ones that turn every page aren’t going to tell you what they’re finding. So you’ve got to do a little bit yourself.”
Liquidity for opportunity
“You can’t be filled with self-doubt in this business”
Buffett has been able to hold high levels of cash in the portfolio with near-spiritual levels of shareholder trust. Buffett has been a net seller of stocks in the portfolio for a 10th quarter in the row meaning the current cash position held at Berkshire is a record ~ $350 billion, which for context, is bigger than all the Ivy League university endowments combined. Often investment managers can be questioned by investors for keeping money parked on the sidelines, but Buffett has shown that cash is a legitimate and credible asset in investment portfolios.
Pounds that compound
The long running debate whether investors should seek income from equities rumbles on. Berkshire paid the one and only dividend in its history of 10 cents a share back in January 1967 to give a total distribution of $101,755. If, instead of paying the dividend it had been retained in Berkshire’s stock, this would have been worth $4.8 billion today. The compounding of investment returns is a simple lesson but arguably the most important.
Looking at Buffett’s net worth, it was $3bn when he was aged 65 and $160bn aged 94. Another example of the power of compounding.
"I bought my first stock when I was 11 and I’ve been compounding ever since"
There will likely never be another Buffet
"Berkshire is an unusual company, and I think it will remain so"
It feels somewhat odd to suggest that no one can eclipse the efforts of a 94-year-old. People have more access to information now than ever before and generally, people should get better at things over time. Factoring in the advancements of computing and declining trading costs, the argument for a ‘Buffett 2.0’ feels strong. Generations of academics and financial journalists have looked to explain what Buffett does and many commentators have attempted to glean any lessons to incorporate into their own investment strategy.
Despite this, our conclusion is that Buffett is a true outlier that we will almost likely never see repeated. Berkshire benefitted from a unique era of U.S. economic expansion and relatively little competition early on. Buffett’s ability to access cheap long-term leverage against the insurance arm of the business is unlikely to be allowed again. Buffett’s long term buy and hold strategy of a concentrated number of stocks is not congruent with modern finance. Buffett himself advises those of us who can’t devote their lives to picking stocks to ‘stick with the index’ – advice which underscores the reality of markets so heavily influenced by index fund activity.
Portfolio managers around the world will certainly attempt to recreate Buffett’s performance under Berkshire – replicating his legacy will be a tall order.
Yuval Peshchanitsky
Portfolio Analyst
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Important Information
All expressions of opinion reflect the judgment of Artorius at 16th May 2025 and are subject to change, without notice. Information has been obtained from sources considered reliable, but we do not guarantee that the foregoing report is accurate or complete; we do not accept any liability for any errors or omissions, nor for any actions taken based on its content. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested. Past performance is not a reliable indicator of future results. Nothing in this document is intended to be, or should be construed as, regulated advice. Artorius provides this document in good faith and for information purposes only. Reliance should not be placed on the information contained within this document when taking individual investments or strategic decisions.
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