AS.180.261 Lecture Notes - Lecture 6: Credit Default Swap, Berkshire Hathaway, Warren Buffett
Document Summary
Genius warren buffett has an unusual talent that possibly nobody in the world has to the same degree. Berkshire hathaway is a holding company; buffett has been unbelievably successful in beating the market. 1965 2009 compare average return of s&p 500 (9%) and berkshire. Compounding over the years magnifies the difference in average returns between the two. For example, ,000 in the s&p 500 in 1965 would yield ,000 in 2009 with a rate of return of 9%, whereas ,000 in berkshire hathaway would yield million. Warren buffett has been deemed the best stock-picker for decades and shows no sign of returning to average. Critics argued that since people want to own berkshire hathaway stock, the price would be bid up to the point where it offsets buffett"s genius. However, from 1989, he continued to outperform the market. He does fundamental analysis of companies familiar, well-established companies, not start-ups or cutting-edge tech companies.
