Vetr Blog

Crowdsourced price predictions for the stock market.

Berkshire Hathaway: Slow and Steady Wins the Race

We’ve written in previous posts about the decidedly tech-heavy preferences of Vetr.com users. Nine of our top ten stocks in terms of number of ratings are technology firms – ten if you count Tesla ($TSLA – while tech stocks totally dominate Vetr.com watch lists.

However, it’s not a tech stock that is watched by the most Vetr.com users. It’s an ETF.

Specifically, the SPDR S&P 500 ETF ($SPY), which tracks the S&P 500 Index. This security is watched by more than 500 Vetr.com users, which is roughly 50% more than the 328 watching #2 Apple ($AAPL).

Meanwhile, only a mere 20 Vetr.com users are watching Warren Buffet’s Berkshire Hathaway ($BRK.B). The company, run by arguably the most famous (and successful) investor who has ever bought or sold a stock, has one lone rating (a buy).

It seems Buffett and Berkshire are off the radar when it comes to our users.

This is somewhat understandable. Vetr.com users are generally younger and can identify much more readily with social media, networking and other technology stocks than they can with conglomerates run by an octogenarian. Moreover, tech stocks are hot and volatile, zooming up (and down), post truly fantastic growth numbers, and get all the press. And there is no denying the sheer scale and disruption wrought by a many of the technology companies represented so well by our users’ watch lists and ratings ($AAPL, $FB, $YHOO, $GOOG, etc.). By and large, blue chip tech stocks have been a good place to put money to work.

Yet it is also interesting, given that the #1 most-watched security on Vetr.com is a broad market ETF designed to clone the performance of the S&P 500, that Berkshire is practically ignored. Why? Because in terms of compound annual per-share price performance, Berkshire Hathaway beats the S&P 500 by a factor of more than two – 21.6% to 9% since 1965.

This weekend, Buffett released his annual shareholder letter, an annual exercise that, over the years, has probably taught more people about fundamental investing than any broker, course or seminar. As usual, it is filled with wisdom gleaned over buying low and selling high for fifty years, solidly outperforming generations of professional money managers.

The takeaway is that portfolio performance is best measured in decades, not months or even years. Since 1965, Berkshire Hathaway’s overall share price gain has been an eye-popping 1,826,163%, while the S&P 500’s, including dividends, has been 11,196%.

Talk about outperformance.

Popular stocks come and go, and sector fads can burn very brightly before they fizzle (remember RFID?). Investors like Buffett know how to consistently make money in any market, regardless of which sector or new fad dominates everyone’s attention, because they focus on long-term fundamental drivers of value. It is the science of investing versus the thrill of speculation.

The lesson from old story of the tortoise and the hare was that slow and steady wins the race over the long haul. Berkshire certainly has. The stock isn’t followed by many Vetr.com users yet, but maybe it should be.

Buffett’s latest letter is freely available at http://www.berkshirehathaway.com/letters/2014ltr.pdf.