Moneycontrol PRO
Upcoming Event : LeapToUnicorn - mentoring, networking and fundraising for startups. Register now

'Warren Buffett no longer on top of his game': Berkshire shareholder sells his stake

In a letter to his clients, Rolfe cited missed investment opportunities by Buffett during the current bull market as one of the reasons for his frustration.

October 17, 2019 / 02:59 PM IST

Long-time shareholder of Berkshire Hathaway, David Rolfe, has sold his firm's stake in the company, following a decade-plus period of underperformance by the stock.

According to a report by CNBC, Rolfe, chief investment officer at Wedgewood Partners, informed his clients about the stake sale, while calling into question the investment decisions of Warren Buffett and his team.

Rolfe accused the legendary investor of "thumb-sucking", referring to Berkshire's massive cash hoard -- $122 billion at last count -- and said the decision has led to its stock under-performing the broader benchmarks.

During the current bull run which began in March 2009, Berkshire's shares have lagged the S&P 500. While Berkshire's Class A stock went up 323 percent during the said period, the index had gained 334 percent, according to CNBC.

Throughout the bull market, Buffett has maintained that he is not finding enough value in stocks, even as he kept scouting for opportunities for an "elephant-sized acquisition" that would move the needle for Berkshire's massive portfolio.

"The Great Bull could have been one helluva of an astounding career denouement for Messrs. Buffett and Munger," Rolfe, whose fund owns 48,000 Berkshire Class B shares (worth $10 million), wrote in his letter to clients. Instead, "thumb-sucking has not cut the Heinz mustard during the Great Bull Market of 2009 – 2019," he said, taking a dig at Buffett's decision to invest in Heinz.

Such decisions, he said, "do not inspire confidence that Buffett & Co are on top of their game".

CNBC noted that Rolfe's own fund had underperformed the benchmark -- 13.6 percent annualised over the past 10 years compared to the S&P's 14.7 percent.

The Wedgewood CEO also had a problem with Berkshire's investments during the period, IBM and Heinz being the two notable ones.

In 2013, Warren Buffet teamed up with Brazilian private equity giant 3G Capital to acquire a company on which he had for long had his eyes on- the cash rich consumer brand chain Heinz.

However, the packaged food brand's stock sank earlier this year after accounting problems came to light causing a market value erosion of nearly $16 billion. Buffett's Berkshire Hathaway lost about $4.3 billion on its 26.7 percent stake in Heinz.

Buffett, who had for decades sworn off tech on grounds that it is beyond his circle of competence, also disclosed a surprise $10.7 billion bet on IBM in 2011.

By the time Berkshire sold its IBM stake in 2018, the stock had fallen more than 20 percent.

Rolfe also took aim at Buffett's missed opportunities -- specifically, companies that he had invested in but nearly enough -- such as credit card companies Mastercard and Visa.

"These two stocks should have been layups for Buffett," Rolfe said, citing Buffett's decades-long holding in American Express.

Still, Berkshire continued to hold relatively small holdings in both Visa and Mastercard, failing to double down, even as both stocks set the charts ablaze over the past decade.
Moneycontrol News