Maybe Warren Buffett should go back to investing.
That’s what I’m hearing from more and more people in the markets these days as they digest the performance of Buffett’s investment company, Berkshire Hathaway. Maybe he needs to spend more time at the office, and less promoting President Obama’s tax-hike agenda.
No other American businessman is celebrated by the media more than Buffett, the famed Oracle of Omaha, Neb., known for his stellar long-term record of scooping up investments unrecognized by other money managers and producing returns that beat the market.
But Berkshire released its annual report last Friday, and the miracle man proved mortal.
One of the most closely read documents in the financial world, the Berkshire report is usually sprinkled with Buffett’s trademark homespun wisdom on the markets, plus some lecturing on how his fellow businessmen can follow his lead and be better corporate citizens.
It also contains lots of numbers meant to bolster Buffett’s reputation as the world’s greatest investor. But this year’s numbers point the other way.
Remember Buffett is supposed to do really well over the long term; it’s all part of his “value investing” shtick: Buying companies ignored by the market on the cheap, and watching them grow as profitable outfits over time, with tremendous results for Berksire’s clients.
Yes, but most investors’ timeframe doesn’t last more than 10 years; that’s why smart stock-pickers look at five-year returns, and there Berkshire hasn’t even beaten the total return of the S&P 500 index: It’s up just 16 percent compared to a 32 percent return on the S&P.
Buffett doesn’t do much better over three years, up about 23 percent versus 35 percent for the S&P.
For 2012 alone, even Buffett concedes that the S&P beat him, returning 16 percent compared to Buffett’s “book value” measurement, which shows a return of 14 percent.
“If you look at [Buffett’s] performance lately, he’s actually below average,” notes Ed Butowsky, who runs Chapwood Capital Investment Management, which advises clients on where to put their money. “In fact, he isn’t very good at all lately, though he continues to have good PR.”
OK, there are lots of ways to crunch performance, and Buffett will argue that other metrics support his rep despite his 2012 failings. (He prefers looking at Berkshire’s “book value” or the balance sheet value of his assets and comparing that to the S&P.) And yes, Berkshire is very profitable. In 2012 alone, its net worth rose $24 billion.
Still, Buffett himself called his 2012 returns “subpar” and offers at least one excuse: Running a fund of this size (market value around $250 billion) is difficult, because you need to generate much higher returns to make an impact.
Thing is, it’s his decision to keep Berkshire so large; he could easily return a nice fat dividend to shareholders, but he’s been loath to do so over the years.
And, for all his image as a careful investor, Buffett’s actual investing style is more risky than most people realize, which means his good years need to be higher to compensate clients for the chances he takes on all those “value” investments.
But, as the country’s most famous limousine liberal, beloved by the business media, he gets a pass that other investors don’t get.
Is the problem age? Buffett is 82, but has been dragging his feet on choosing a successor.
Or perhaps he’s just spread too thin, what with all the politicking he’s done in the Obama years. It’s hard to recall anytime in recent memory that any investor has been as politically active as the Obama-era Buffett.
He’s given numerous interviews in support of the Obama “tax fairness” campaign, repeating his claim that he’s taxed at a lower rate than his secretary (she even showed at last year’s State of the Union spectacle).
He’s even allowed his name and image to be used to promote the cockamamie “Buffett” tax on millionaires, which wouldn’t do much for the deficit but did give the president a nice talking point on his way to re-election.
With all this support from an economic genius like Buffett, you’d think that President Obama would have the economy on overdrive. News flash: It’s not, and won’t be anytime soon, given all the taxes he has raised and still threatens to raise.
The numbers don’t lie: When it comes to the economy, Obama is no Warren Buffett. And based on the latest Berkshire returns, even Warren Buffett is no longer Warren Buffett.
Charles Gasparino is a Fox Business Network senior correspondent.