​Warren Buffett Bad News Surprises Shareholder Meeting

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March 4, 2013
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Warren Buffett delivered some bad news in his annual shareholders letter, stating that Berkshire Hathaway’s 14.4 percent gain trailed the S&P’s performance.

Most companies would appreciate this news, which also means a profit of $24.1 billion. Even so, it’s not enough to keep him optimistic. The Berkshire Hathaway CEO is searching for more acquisitions.

In fact, It’s the ninth time in 48 years this has happened. Buffett notes that the S&P has outpaced Berkshire over the past four years and if the market continues to gain this year the benchmark stock index could have its first five-year win ever.

“When the partnership I ran took control of Berkshire in 1965, I could never have dreamed that a year in which we had a gain of $24.1 billion would be subpar … But subpar it was.”

Buffett notes that while he believes Berkshire’s intrinsic value will probably beat the S&P by a “small margin” over time, the company’s relative performance is better when the market is down or unchanged.

“In years when the market is particularly strong, except us to fall short.”

Even with the bad news, Buffett warned that he and partner Charlie Munger “will not change yardsticks. “It’s our job to increase intrinsic business value — for which we use book value as a significantly understated proxy – at a faster rate than the market gains of the S&P.” If they are successful, Berkshire’s share price will beat the S&P “over time.”

Buffett did have praise for his two new investment managers, Todd Combs and Ted Weschler, writing that “we hit the jackpot with these two,” stating that they both outperformed the S&P by “double-digit margins” in 2012.