Omaha! Every time Warren Buffett is mentioned, I think of Peyton Manning's ardent line-of-scrimmage call and wonder if the wisdom of the Oracle is location-specific.
I derive great benefit from being a New York City resident with easy attendance at investment conferences and drinks with friends (had some last night, actually) who are "in the business." Talking through ideas is always helpful.
Warren seems to have done pretty well despite his distance from the world's major financial centers, but I deal with facts, not platitudes. A quick check of Morningstar.com gives the answers.
Looking at Morningstar's data we can see that Berkshire Hathaway (BRK.B) has underperformed its benchmark in the one-month, one-year, five-year and 10-year periods. To "lose" to the market by 280 basis points over a five-year period is really an unacceptable performance, and it shows the lack of exposure to technology, which is endemic to Berkshire.
You don't need to go to Morningstar to know that Berkshire shares have lagged the Nasdaq by a huge amount over the past five years, and that is the problem with Buffett's investing style. Value investing is out of favor, and as a fellow practitioner of deep-value analysis, I frankly have no idea when that is going to end.
So, maybe you should not emulate the Oracle after all. Berkshire has been growing its exposure to Apple (AAPL) , which as of the company's most recent 10-Q filing was Berkshire's largest individual stock holding at $40.7 billion, representing about 25% of the value of the company's stock portfolio. That's been a winner, and with Apple doing right by its shareholders -- to the tune of $100 billion in planned share repurchases -- I see no reason why you should sell those shares now, and I doubt that Berkshire has sold any either.
The other members of Berkshire's "big 5 plus one" -- the five largest shareholdings plus Kraft Heinz (KHC) , which is classified separately given Berkshire's major shareholding in the company -- are more problematic. In order those stocks are Wells Fargo (WFC) , Bank of America (BAC) , Coca-Cola (KO) and American Express (AXP) .
I don't own any of those names and am not planning to do so any time in the future. I just don't see why anyone would buy Bank of America over JPMorgan Chase (JPM) , and Wells has been a nonstop bad news machine.
Coca-Cola suffers from the malaise enveloping consumer stocks, and the simple fact that its core product is horribly unhealthy. I really don't see the bull case for Amex, either, although it's probably more attractive than the other three.
That leads to Kraft Heinz, which has been an unmitigated disaster for shareholders, trading now at $62 per share versus its year-ago price of a few pennies below $90. KHC really hurts and Buffett has some culpability there as the company's $8.3 billion 9% preferred stock issue -- redeemed in 2016 -- was an absolutely horrible piece of paper, and really hamstrung that company's ability to restructure post-merger. It's too late to fix Kraft Heinz now, and Buffett and his partners at 3G are stuck with it.
So, maybe investors should emulate Peyton Manning and call an audible on investing like the Oracle. Apple has been a great performer, and I see no reason that would change, but the rest of Berkshire's holdings have been mediocre or worse.
I think we're past the point of wondering if Amazon (AMZN) , Netflix (NFLX) , Facebook (FB) and Alphabet/Google (GOOGL) are fads. They are here to stay, and if they are not in your portfolio, you will lag the market just as the Oracle of Omaha has.
