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He Should Have Stuck With Stocks
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The only Buffett-watcher to predict his retirement this year… Buffett made capitalism more credible… Investing in Apple was a big winner for Berkshire… Berkshire Hathaway Energy has been a total failure… Buffett’s final message to U.S. investors… Retail investors refuse to stay away… |
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Well… nobody gets everything right when they’re trying to predict the future… but I believe I’m the only Buffett-watcher who accurately predicted his retirement this year.
Warren Buffett announced that he’s going to retire at the end of the year, passing the Berkshire Hathaway (BRK) CEO role onto Greg Abel, the architect of Berkshire’s energy business unit, which used to be called MidAmerican Holdings and is now known as Berkshire Hathaway Energy (“BHE”).
I’ve been calling for Buffett to retire for much of the last year.
Why do I care?
I’ve spent a huge amount of time over the course of my life studying Berkshire Hathaway and Warren Buffett. I’ve done so because, for my entire lifetime, investors had a virtually guaranteed way to beat the stock market: all they had to do was buy shares of Berkshire.
As a result, for a huge number of investors around the world, Berkshire became a totem of capitalism. Before Berkshire, a lot of people thought of investing as gambling. And most people believed anyone who could beat the market only did so by cheating or stealing, like the 1987 movie Wall Street sought to portray.
But Berkshire changed all of that. Its structure guaranteed investment success while Buffett’s personal reputation made investing respectable. The combination showed, beyond any doubt, that capitalism was more credible and more effective than socialism.
Unfortunately, since 2000 and, even more so, since the Global Financial Crisis, Berkshire’s track record has become dramatically less consistent. Most investors simply don’t realize the enormous impact that Berkshire’s investment in Apple (AAPL) has had on Berkshire’s success. Berkshire made a “bet the company” investment into Apple, buying 1 billion (!) shares between 2016 and 2018, for around $36 billion – a stake equal to more than 10% of Berkshire’s total equity.