The debate about attending the Berkshire Hathaway AGM, which was held in Omaha, Nebraska, last month, refuses to die a quiet death.
It would seem that everywhere I turn, I bump into someone who has either participated in this annual pilgrimage or has very strong views on this issue.
Kokkie Kooyman, probably the biggest Buffett-fan in South Africa, recently released a report after he visited Omaha earlier this year. He has attended this AGM an astonishing 15 times and, together with this wife Nora, seems to have been the unofficial tour guide for the more than 50 South Africans who attended this year's investment Woodstock.
His report was compiled on behalf of Nedgroup Investment managers and contains the usual adoration for Warren Buffett and Charlie Munger, the two geriatric managers of Berkshire Hathaway.
Under the title ‘Unrivalled track record’ Kooyman sets out to describe to readers the amount of wealth created by Buffett and Munger to their shareholders, with the book value of Berkshire Hathaway growing at an annual rate of 19.7% versus the S&P 500 index, which only grew at an annual 9.8% per annum since 1965.
An amount of $1 million invested in 1965 would be worth $5.6 billion today, compared with only $89 million for someone who invested in the S&P500 index.
As I said in my previous article on this issue, these returns are astonishing and cannot be faulted in any respect. This was never my intention.
I made some comparisons of these returns with other investments that were available to local investors, including an investment in the Rembrandt Group of companies, PSG (although it is only 20 years old) and also Allan Gray through Orbis Investment Management.
I am still waiting for the results from Rembrandt and PSG, but so far Allan Gray has responded with the performance figures of the Orbis Global Equity
Fund, a fund founded in 1990 and managed by, first, Allan Gray himself and now his son William, following the same investment philosophy.
Orbis describes itself as contrarian fund managers, rather than value fund managers.
A comparison of returns on a $10 000 investment in the Berkshire Hathaway and the Orbis Global Equity Fund in January 1990 to the end April this year (see graph below), reveals a very close correlation in returns over this period, with Berkshire marginally ahead with an investment amount of $221 619 versus $182 057.
This paints a totally different picture to the often-used graph used to illustrate the superior performance of Berkshire versus the S&P500 index, as Kooyman does in the graph below, which he used in his ‘Unrivalled track record’ report referred to above
But it is when the returns of the past 14 years are compared that the under-performance of Berkshire becomes very apparent (see graph below).
n fact, when compared with the Orbis Global Equity Fund you would have to ask searing questions as to why anyone would recommend Berkshire Hathaway over an investment in the Orbis fund.
The contrast between the two individuals - Warren Buffett and Allan Gray - could not be starker. Buffett (83) is the affable showman of the investment world, while Allan Gray (76) is secretive, mysterious and almost invisible to the public eye. He rarely grants interviews and it is difficult to even find a photograph of the person reported to be South Africa's richest man.
Yet his investment returns in the Orbis fund not only match that of the legendary Buffett since inception, but also beat him hands-down over the last 14 years.
Is Buffet really the best investor in the world?
It seems as if I'm not the only columnist questioning the universal adulation for Buffett. Writing on the influential financial website Marketwatch.com Paul Merriman, one of the most respected writers and authors on financial matters in the US asks the following: "Buffett is smart, generous, industrious, famous and known for integrity. But is he really the world's best investor?”
In the article, Merriman asks two pertinent questions on Buffett and his investing philosophy:
1. How have his investments fared over the past 15 years?
2. If he is so smart, why does he set the bar so low for measuring his success?