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 By his own benchmark for performance, Buffett's Berkshire Hathaway
Inc almost certainly lagged a red-hot stock market in 2013 and
probably also fell short over the previous five years, his favored
timeframe for measuring the firm's return for its investors.
Using the gain in Berkshire's book value per share after taxes,
which Buffett traditionally contrasts with the pre-tax total return,
including dividends, on the Standard & Poor's 500 Index, Berkshire
will be hard pressed to match the S&P's 128.2 percent gain in the
five years ended December 31, 2013.
Investors will learn for sure when the world's fourth-richest man
releases his annual letter to investors on Saturday around 8 a.m.
Eastern time.
Buffett, 83, had already warned last year that he might miss his
target, noting that his conglomerate of more than 80 companies and
investments might fare relatively better in weaker markets than
stronger ones.
The S&P's sharp rally since 2008 has made Buffett's benchmark
particularly difficult to maintain over the past five years due to a
flood of money from the Federal Reserve boosting equity markets. The
whopping 32 percent total return on the S&P last year only makes it
more likely that Berkshire's book value did not match the index's
five-year performance.
In fact, he would have required a one-year gain of more than 40
percent in book value per share from 2012's $114,214 to keep his
prized streak alive.
Ironically, Buffett took on the role of cheerleader for the American
stock market during the depths of the recession, writing an Op-Ed
piece in the New York Times on October 17, 2008 imploring readers to
"buy America."
WORRY LIST GROWS FOR BERKSHIRE
Berkshire has grown so big that some investors worry it will not be
able to grow as quickly in the future.
Hedge fund investor Doug Kass, who runs Seabreeze Partners
Management, questioned Buffett about that very issue last year at
Berkshire Hathaway's annual meeting, which draws thousands of people
to Nebraska to a question-and-answer with Buffett and other company
executives.
Kass was invited as Berkshire's first "credentialed bear" to ask
tough questions about the company's performance.
Kass, who remains short Berkshire stock, noted then that Buffett is
now looking for larger and larger acquisitions, which are harder to
find at attractively undervalued prices.
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That said, Buffett has hardly become a slouch at making money.
Berkshire Hathaway will probably report operating earnings per share
of $2,203.91, according to the average analyst estimate as compiled
by Thomson Reuters I/B/E/S, and full-year net income of about $15
billion.
The annual letter to shareholders mixes Berkshire's results with
everything from Buffett's views on the business climate to
common-sense wisdowm about investing - as well as an update on
Berkshire's dozens of businesses, from lollipops to insurance.
In an excerpt that leaked earlier this week, for example, Buffett
yet again banged the drum on the need for simple, disciplined,
low-cost investing, especially for nonprofessional investors such as
retirement savers.
Investors will also scour this year's letter for any word on a
possible successor to Buffett at Berkshire.
The Oracle of Omaha, as Buffett is known, has already talked a bit
about what Berkshire could look like without him, but he's shied
away from naming the next person to take the baton.
Meyer Shields, an analyst with Keefe, Bruyette & Woods, Inc, said he
expects "no real information on transition. I'd love to be wrong
here, but the odds are ... against the idea of any useful
information in terms of who takes over."
The letter is also something of a preview for Berkshire Hathaway's
annual shareholder meeting in early May, when Buffett and other
Berkshire executives hold forth in Omaha on where the company could
be headed.
(Reporting by Luciana Lopez; Editing by
Dan Grebler)
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