Warren Buffett took the helm as CEO of Berkshire Hathaway before most people reading this article were even born.
His tenure started in 1965, not long after John F. Kennedy was shot. This predates the moon landing, Microsoft, and mobile phones.
While his tenure is impressive, it is the approach which made Buffett famous. A student of Benjamin Graham's value investing, Buffett resisted the lure of algorithmic trading and 90 day stock cycles. Instead, he sought to buy strong companies at reasonable prices, then hold for the long term.
The results speak for themselves.
Exceptional historical performance: between 1965 and 2023, Berkshire stock generated an average annual return of +19.8 %, compared to +9.9 % for the S&P 500 over the same period
All of this is leading to the inevitable ending of his tenure. Nobody lives forever and Buffett certainly surpassed the average.
It was announced that he will be stepping down as CEO of the company at the end of the year. Considering he is celebrating his 95th birthday, that is quite an accomplishment.
The End of an Era: Warren Buffett Stepping Down
Crypto. AI. Big Tech.
Buffett resists it all. He does not invest in fads or things he doesn't understand. His strategy is considered obsolete by many. However, Buffett still views stocks as pieces of companies. For this reason, ownership stake is what he acquires.
Consistent returns compounded over decades was the key to Berkshire's returns. Each company acquired was treated as its own entity. A near 20% return was achieved by having many dominant players in specific industries.
This was buffered by the resistance to "what's hot". Buffett's most successful move, at least in terms of dollars generated, was jumping into Apple. He did this in 2016, after the company was 40 years old. Huge returns were already generated by the stock, with many believing Ole Warren was late to the game.
As he repeatedly showed throughout his career, his careful analysis ultimately paid off. He did not care what happened in the past. His entry in 2016 was when he felt the company fit into the model he always operated from.
Never Panic
It was said that Buffett didn't even have a computer on his desk. Long time business partner, Charlie Monger, once said that it was the role of everyone in Berkshire to make sure the CEO could focus upon reading annual reports.
That was Buffett's strategy. He would pour through the documentation put out by the companies in an effort to fully understand them. His methodology included numerical analysis, coming up with a fair value for the entire company. From there, he used simple math to determine if it was a buy.
Most notable was his ability to resist panic. Since he wasn't driven by markets but, rather, profitability outlook over the long term, market panic didn't enter his radar.
David I. Kass, professor at the Robert H. Smith School of Business, points out that “Buffett said that what distinguishes successful investors from others is the ability not to panic when markets fall, nor to become euphoric when they rise sharply”. A principle he put into practice, notably during the 2008 crisis, when he intervened as lender of last resort for Goldman Sachs or General Electric.
Buffett had two buying strategies:
- Buy entire private companies
- Buy sizeable positions in public companies
With the latter, he held some of this in his portfolio for decades. He is known for his love of Coca-Cola, both the soft drink and stock. This was one of his earlier acquisitions that he just kept benefiting from.
Lesson For Crypto
Crypto is really nothing more than a casino.
We can look at some projects or networks and see value there. However, if we take the industry as a whole, there is a lot of crap. Buffett is a long time critic of crypto. The industry did a great deal to bring this upon itself.
It is filled with people who are looking for nothing more than "moonshots". They want to buy at 1 cents and cash out at $100. This is anti-Buffett.
Do a few hit the lottery? Certainly. However, many within the crypto world would be smart to take something from Buffett. Short term thinking is fatal. Traders believe they can beat the market yet the evidence is clear that the opposite is true.
Buffett didn't manage money. He ran an entity which controlled companies. Many call him an "investor" (the greatest of all time) when he is actually a businessman. He saw opportunities within different industries and ensured that Berkshire could profit.
Nothing that Buffett did was glamorous or sexy. In fact, it was downright boring. That is his key to investing. He wasn't in it for the emotional rush. Making large sums of money over time is what he was after.
Crypto holds some wonderful opportunities. The question is how many will really profit? Since the tendency is to enter and exit based upon the next price move, most will end up failing. In chasing the dreamy returns, they surpass the coins or tokens that will provide long term yield.
This was Buffett's forte.
His retirement marks the end of an era.