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Why a longtime major investor has lost confidence in Buffett and Berkshire



Warren Buffett was hailed as one of the greatest investment geniuses of all time for decades, but his under-management of Berkshire Hathaway Inc. (BRK.A) as CEO cost him a long-term following at an acceleration rate. One of them is David Rolfe, Chief Investment Officer (CIO) of Wedgewood Partners, an investment company with more than $ 2 billion in assets under management (AUM), which has sold its entire Berkshire share after more than 20 years.

"The thumb sucking did not cut the Heinz mustard during the Great Bull Market 2009-2019," Rolfe wrote in the customer letter from Wedgewood Partners for the third quarter of 2019. "The Grand Bull would have been unbelievable for Messrs Buffett and Munger Career opportunity. " Instead, Berkshire was a notorious market retainer, as Rolfe writes, "In fact, since the Grand Bull began on March 9, 2009, the stock of Berkshire Hathaway B has risen by a remarkable 269% in the last quarter, during which S & P rose 500 Index by 370%. "

Key Takeaways

  • The performance of Berkshire Hathaway remained behind the previous year's market for years.
  • A longtime big investor has written a scathing criticism of Buffett.
  • This investor sees numerous mistakes and missed opportunities from Buffett.
  • He also believes that Buffett should return capital to shareholders.

Importance for Investors

The performance of Berkshire in 2019 was equally disappointing. By October 15, both the A and B shares have gone up by less than 3%, while the S & P 500 has gone up nearly 20%.

Rolfe cites four main reasons for his loss of confidence in Buffett. These are: botched investments in KraftHeinz and IBM; missed opportunities to buy big winners like Visa MasterCard, Costso and Microsoft; a poorly executed acquisition strategy and the failure to do enough big business; and not to return Berkshires Geldberg to investors through share buybacks and dividends.

botched investments . Kraft Heinz Co. (KHC) was formed as a result of a Buffett-backed merger, but the combined company was a loser who saddled Berkshire with an unrealized loss of more than $ 1 billion, Barrons notes said. In the meantime, his interest in International Business Machines Corp. (IBM) over 6 years (2011 to 2017) per GuruFocus a small total profit of less than 5%.

Missed opportunities. Rolfe complains and cites the stock market gains of these stocks until the third quarter of 2019: "Mastercard [inc. (MA)] has grown an amazing + 1,521%, while Visa [Inc. (V)] has risen by nearly a staggering + 1.137%, though not all is lost Buffett's two CIO lieutenants currently both own shares with a combined weight of just 1.50% of Berkshire's current stock portfolio and the current combined weight should be 15.00%. "

Rolfe continues with these damning remarks:" Two more layups are Costco [Wholesale Corp. (COST)] and Microsoft [Corp. (MSFT)]: Buffett has unrivaled expertise in every back pocket for years, but with no shareholder access Charlie Munger has been a Director at Costco for 22 years The bull's gain is + 522% Buffett's lieutenants currently have a stunning 0.55% position with Costco. "

e "Even more stunning is Microsoft. Buffett meets Bill Gates for the first time Almost 30 years ago, they became fast best friends In 2004, Gates joined the Berkshire Board of Directors. Buffett probably spends more time each day talking to Gates (Gates Foundation and Bridge games) than to Berkshire's deputy board members, Ajit Jain and Greg Abel.

Forward-looking

Large public pension funds seem to have dissimilar views on Berkshire stock: Oregon's Public Employees Pension Fund (OPERF), the world's 42nd largest public pension fund by assets, has its holdings of Berkshire stock Class B trimmed 39% in the second quarter of 2019 from the sale of 141,822 Class B per Barron shares, with the remainder of Berkshire's 222,763 Class B shares at approximately $ 47 million at current price.

New Jerseys pension system "is in crisis" As the President of the Senate noted in May, Barron & # 39; s stated that the Fund's assets accounted for only 38.4% of its liabilities as of June 30, 2018. According to the same report, the fund purchased around $ 100 million Berkshire B class participates in 2Q 2019. Whether this is Buffett's desperate move or a deliberate move, w Only time will show.


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