Warren Buffett Has Lost His Touch….?

… or so it was suggested by financial newswire Barrons back in 27 December 1999.

On that fateful day, Barrons was direct in its assessment of Buffett during the late 1990s, saying quote:

To be blunt, Buffett, who turns 70 in 2000, is viewed by an increasing number of investors as too conservative, even passé. Buffett, Berkshire’s chairman and chief executive, may be the world’s greatest investor, but he hasn’t anticipated or capitalized on the boom in technology stocks in the past few years.

As we now know, Barrons was off the mark in its assessment.

Shares of Berkshire Hathaway went on to return a hefty 300% in capital gains since the article. These returns have blown away a comparable 43% return in the US-market barometer, the S&P 500 over the same period.

With Buffett hosting Berkshire Hathaway Inc’s annual general meeting over the weekend, it may be a good time to look back on the lessons we can learn from the days of the late 1990s.

Measuring Long Term Investing

In the Barrons article above, it was suggested that Buffett’s approach had gone stale, with faster-moving internet stocks surging past his stodgier stock picks. The article also pointed out that shares of Berkshire Hathaway were down in the year 1999.

And yet, therein lies the dichotomy between long-term investing and short-term measurement.

Investing for the long term does not mean that Foolish investors will clock in steady stock market gains every year. Far from it. If we choose to measure ourselves on year-by-year basis, we are bound to be disappointed a some point.

Case in point: The chart below from my Foolish colleague Ser Jing displays the range of annual returns for the Straits Times Index (SGX: ^STI) from 1988 to 2013.

Return distribution for Straits Times Index

Source: Yahoo Finance

Astute Fools would have noted that there were years where the returns of the STI were less than impressive. In fact, there was one instance where the STI fell more than 40% in the 25 year period.

However, if we were to stretch out our measurement period beyond a year, we get a better idea of the power of longer-term horizons. Ser Jing notes that there has not been a rolling 20-year period that the STI has made any losses.

Foolish takeaway

As such, like Buffett in the late 1990s, we owe it to ourselves to keep our wits about us and apply a long term view in our own investing.

And, it is not for nothing that we follow this long-term view.

Investing for the long term has brought annualised returns in book value of 19.4% over the past 50 years at Berkshire Hathaway. This is twice the 8.6% annualized returns of the SPDR STI ETF (SGX: ES3) from its inception in 11 April 2002. The SPDR STI ETF is a proxy for the STI.

Now, that’s a demonstration of long term investing that we  can aspire to.

Stay tuned for more lessons on Warren Buffett in the coming week. Or check-in with my colleague Stanley who will be bringing news of the Berkshire Hathaway annual general meeting from 14,863km away at Omaha.

Meanwhile — stay hungry, stay Foolish!

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong owns shares in Berkshire Hathaway.