Last May, as you may all remember, I went to the Berkshire Hathaway annual meeting. My musings on the experience, and the future of value investing, are here.
The friend who showed me around sent some further thoughts this morning, which I thought were worth sharing:
This link (http://www.rationalwalk.com/?
p=201) is a post considering Berkshire's insurance businesses. It notes that from 1999 to 2008 they have generally made an underwriting profit. Meaning Buffett has written policies conservatively enough to receive the float for free. Even if the result had been a 1% per year LOSS, that would be very cheap money. So he certainly benefits from leverage.
Buffett's record is pretty incredible (in one way or another it can be tracked back over 50 years and works out to around 20% per year). Its length is what makes the returns so amazing. I don't know of anyone else who has a track record of as many decades. But there are a few guys who are worth mentioning and following. These are some value-focused managers who are not Buffett yet who have good long-term (10+ to 30+ year) track records:
(1) Sequoia Fund - From July 15, 1970 to 6/30/2009 average annual total returns of 13.98% vs. 9.98% for the S&P 500. - Sequoia was started by Bill Ruane, a friend of Buffett's, and it is where Buffett recommended that investors in his private partnership put their money when he shut down the partnership to run Berkshire (if they didn't want to just hold Berkshire stock). This fund has about $2 billion under management.
(2) First Eagle Global Fund - From January 1, 1979 tp 7/31/2009 average annual total return of 14.33% vs. 9.45% for the MSCI World Index. This fund has about $16 billion under management.
(3) Fairholme Fund - From December 29, 1999 to 7/31/2009 average annual total return of 12.54% vs. negative 2.29% for the S&P 500. This fund has about $6 billion under management.
(4) Baupost Group - From February 1, 1983 to 12/31/2008 average annual total return of 16.5% net of fees and incentives, vs. 10.1% for the S&P 500. This is a hedge fund, unlike the others, which are mutual funds, and it manages almost $17 billion.
If Baupost is still investing in 25 years I wouldn't be surprised if their record deserved to be classed with Buffett's by then.