Buffet, S&P 500

As the old adage goes, “You come at the king, you best not miss”

- Omar Little, The Wire

In 2021, enthralled by rank stock speculation, the media returned to a familiar refrain that occurs every time there is a bubble: that Warren Buffett is over the hill and has lost his touch.

We wrote about this in our piece, Fast Growing Stocks & Profiting from Patience, in February 2021. That piece explained that history had repeatedly vindicated Mr. Buffett’s method of investing after every bubble. Our conclusion then was that this time was no different.

Let’s think back to the internet bubble. If you had invested $1 each in both Berkshire and the S&P 500 in 1995, by the peak of the internet bubble, your Berkshire investment would have risen 126% to $2.26. Your investment in the S&P would have soared 193% to $2.93. You can see this in the first set of bars in the chart below. From 1995 to the peak of the dot.com bubble, Berkshire underperformed the S&P 500 by about 70%.

But roll the clock forward three years after the internet bubble broke. By 2003, that same $1 investment in Berkshire would have risen 197% to $2.97, while your S&P dollar would now only be up 104% to $2.04. This is the second set of bars in the middle of the graph below.

What a difference three years make. From 1995 – 2003, Buffett nearly doubled the S&P500 return.