For those who may not be keeping track_ BRK is now flat for the past .rtf by shenreng9qgrg132

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									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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