Warren Buffett is an inspiration to retirees everywhere. In the 27 years since he reached what the Social Security system said was his full retirement age, shares of his Berkshire Hathaway
BRK.B,
-0.06%
have outperformed the S&P 500
SPX,
-0.26%
by 3.2 annualized percentage points. That puts him ahead of almost all other Wall Street managers, regardless of their ages.
Buffett has also silenced critics from a year or two ago, who at the time were declaring him to be all washed up. At the top of the bull market in early January 2022, Berkshire Hathaway’s trailing 3-year alpha was at or close to an all-time low at minus 12.3 annualized percentage points—as you can see from the accompanying chart. Since then the company’s trailing 3-year alpha has bounced back impressively and is now solidly in the positive column.
Furthermore, and hopefully needless to say, Buffett’s long-term record remains simply outstanding. For the 58 calendar years through the end of last year, Berkshire Hathaway stock has beaten the S&P 500 by 10.0 annualized percentage points (with dividends included). I nevertheless have it on good authority that Buffett, currently age 92, won’t forever be at the helm of Berkshire Hathaway. Since his recent performance shows that he hasn’t lost his touch, many investors are concerned that, once he’s retired, Berkshire Hathaway’s stock will suffer. Many are hoping that he will use the occasion of this year’s Berkshire Hathaway annual report to discuss when he plans to turn over the reigns to Greg Abel, his chosen successor. (The company hasn’t indicated when it will release its annual report; an inquiry was not immediately returned.) On the one hand, I think it’s a safe bet that many knee-jerk investors will sell their Berkshire Hathaway shares if Buffett were no longer at the company’s helm—especially if the news were sudden. On the other hand, I think that such selling wouldn’t be justified. Gutsy investors therefore might want to use any Berkshire stock decline in the wake of Buffett stepping down as an opportunity to buy more. The reason I believe Berkshire Hathaway can perform just as well after Buffett is no longer leading the company is that a stock picking algorithm has been discovered that, in back testing, has performed just as well as the company. Before this algorithm was discovered, Buffett’s rifle-shot approach to picking stocks seemed inscrutable and therefore unable to be duplicated—even by someone as able as Abel. The researchers …