It hasn’t been a banner year for the Oracle of Omaha.
What makes this highly unusual is that Berkshire famously tends to underperform when the S&P skyrockets and outperform when the stocks as a whole do less well, which makes sense given Buffett’s long-term time frame. Indeed, Buffett is well known for instructing investors: “Be fearful when others are greedy and be greedy when others are fearful.”
This year, however, the S&P is slightly lower, with a 0.4 percent decline. And while there is still a month and a half left in 2015, it is notable that this would mark the first year that Berkshire A shares have underperformed in a down year for the S&P 500 since 1990. (Readers might note that this excludes 2011, when the S&P fell by less than 0.05 percent.)
The most striking year of underperformance came in 1999, when Berkshire shares fell 20 percent while the S&P 500 rose by nearly the same amount.
Berkshire stock is the victim of a rough patch for the transportation and industrial businesses Berkshire owns, as well as some unfortunate stock picks. Out of Buffett’s biggest stock holdings, IBM and American Express have gotten licked this year, while Wells Fargo and Coca-Cola are roughly flat.
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In addition, the decline in energy prices has hit Buffett hard.
“Berkshire is one of the largest operators of train portfolios, and those trains move oil and coal. As commodity prices have come down, clearly big trains have been impacted,” said Macrae Sykes, who follows the stock for Gabelli & Co.
Meanwhile, since valuations are not “depressed,” Berkshire has not been able to find particularly exciting things to do with all of the capital its businesses generate, Sykes added.
Buffett has managed to keep himself busy this year, announcing the $37.2 billion acquisition of aerospace supplier Precision Castparts in August. But to Sykes’ point, he told CNBC at the time that the deal was expensive by his standards, with a “very high multiple.”
Still, Buffett and his Berkshire Hathaway have generated massive outperformance over any long period of time.