Imitation is the Sincerest Form of Flattery: Warren Buffett and Berkshire Hathaway
Gerald S. Martin* John Puthenpurackal American University University of Nevada – Las Vegas ******@ john.******@
April 15, 2008
Abstract: We analyze Berkshire Hathaway’s equity portfolio over the 1976 to 2006 period and explore potential explanations for its superior performance. Contrary to popular belief, we find Berkshire Hathaway invests primarily in large-cap growth rather than “value” stocks. Over the period the portfolio beat the benchmarks in 27 out of 31 years, on average exceeding the S&P 500 Index by %, the value-weighted index of all stocks by %, and a Fama and French characteristic-based portfolio by % per year. Although beating the market in all but four years can statistically happen due to chance, incorporating the magnitude by which the portfolio beats the market makes a luck explanation extremely unlikely even after taking into account ex-post selection bias. We find that Berkshire Hathaway’s portfolio is concentrated in r
