For those who may not be keeping track_ BRK is now flat for the past .rtf

					For those who may not be keeping track, BRK is now flat for the past year.

When you generate supernormal returns over a multi-year or multi-decade period of time, every year does not have to
be up. In fact, super-normal returns over a multi-year period are likely to have significantly down years in focused
portfolios or when it’s a single business we’re looking at.

From The Warren Buffett Portfolio, by Robert Hagstrom, pp. 68-69:

In 1986, V. Eugene Shanan, a Columbia University Business School alumnus and portfolio manager at U.S. Trust,
wrote a follow-up article to Buffett's [classic] "The Superinvestors of Graham-and-Doddsville." In his piece, titled "Are
Short-Term Performance and Value Investing Mutually Exclusive?" Shahan took on the same question we are now
asking: How approrpriate is it to measure a money manager's skill on the basis of short-term performance?

He noted that, with the exception of Buffett himself, many of the people Buffett described as "Superinvestors" --
undeniably skilled, undeniably successful -- faced periods of short-term underperformance. In a money-management
version of the tortoise and the hare, Shahan commented, "It may be another of life's ironies that investors principally
concerned with short-term performance may well achieve it, but at the expense of long-term results. The oustanding
records of the Superinvestors of Graham-and-Doddsville were compiled with apparent indifference to short-term
performance." In today's mutual fund performance derby, he pointed out, many of the Superinvestors of
Graham-and-Doddsville would have been overlooked.

Table 4.1 The Superinvestors of Graham-and-Doddsville

                Number of years          Number of Years of             Underperformance years as
                 of performance           Underperformance               a % of all years measured


Keynes            18                6                           33
Buffett           13                0                             0
Munger            14                5                           36
Ruane             27                     10                     37
Simpson           17                4                           24

Let's look at the "dog" of the group, Bill Ruane.

Table 3.4 Sequoia Fund Inc.

                                                      Annual Percentage Change
                                        Sequoia Fund (%)                       S&P 500 (%)

1971                       13.5                                 14.3
1972                         3.7                                18.9
1973                           -24.0                                          -14.8
1974                           -15.7                                          -26.4
1975                       60.5                                 37.2
1976                       72.3                                 23.6
1977                       19.9                                  -7.4
1978                       23.9                                   6.4
1979                       12.1                                 18.2
1980                       12.6                                 32.3
1981                       21.5                                  -5.0
1982                       31.2                                 21.4
1983                       27.3                                 22.4
1984                       18.5                                   6.1
1985                       28.0                                 31.6
1986                       13.3                                 18.6
1987                         7.4                                  5.2
1988                       11.1                                 16.5
1989                       27.9                                 31.6
1990                       -3.8                                  -3.1
1991                            40.0                                      30.3
1992                        9.4                                   7.6
1993                       10.8                                 10.0
1994                        3.3                                          1.4
1995                            41.4                                        37.5
1996                       21.7                                  22.9
1997                       42.3                                  33.4

Average return          19.6                                     16.4
Standard deviation      20.6                                     16.4
[Compound annual return 17.9                                     13.7]

[$1 at inception becomes $85.94 at end of 1997 in Sequoia and $32.24 in S&P 500]

Now let's look at the track record of another Superinvestor of Graham-and-Doddsville:

Table 3.3 Charles Munger Partnership

                                                             Annual Percentage Change
                                           Partnership (%)                      S&P 500 (%)

1962                                30.1                         -7.6
1963                                71.7                        20.6
1964                                49.7                        18.7
1965                                 8.4                        14.2
1966                                      12.4                                       -15.8
1967                                56.2                        19.0
1968                                40.4                          7.7
1969                                28.3                                     -11.6
1970                                 -0.1                         8.7
1971                                25.4                          9.8
1972                                  8.3                                         18.2
1973                                    -31.9                                        -13.1
1974                                    -31.5                                        -23.1
1975                                73.2                                         44.4

Average return                               24.3                                            6.4
Standard deviation                  33.0                        18.5
[Compound annual return             19.8                          4.9]

[$1 at inception becomes $12.57 in Munger Partnership and $1.96 in S&P 500]

The data in brackets are mine. I think this very clearly shows that an analysis of "what have you done for me lately"
without looking ahead is unproductive at best and a reinforcement of a poor investment worldview at worst.

				
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