All the Other Warren Buffetts

SMITH BRAIN TRUST –  Maryland Smith’s David Kass can hardly keep up with all the Warren Buffetts that are rumored to be out there at any given time.

There has been Yang Liu, the “Warren Buffett of China,” and Ratan Tata, a so-called “Warren Buffett of India.” There’s Masayoshi Son, the supposed “Warren Buffett of Japan,” and Carlos Slim, the “Warren Buffett of Latin America.” Don’t forget Prem Watsa, the supposed “Warren Buffett of Canada,” and alternatively, Jim Pattison, also the “Warren Buffett of Canada.” And Al-Waleed bin Talal, he’s called the “Warren Buffett of Saudi Arabia.”

Then there’s Ed Lampert, once dubbed “the Warren Buffett of the hedge-fund world;” Robert Parker, dubbed the “Warren Buffett of wine;” and even Charles Fabrikant, dubbed the somewhat random “Warren Buffett of barges.”

“There’s only one Warren Buffett,” Kass smiles. “And it’s Warren Buffett.”

He knows. A clinical professor of finance at the University of Maryland’s Robert H. Smith School of Business, Kass has closely followed Buffett’s investments and philosophy for more than 35 years. For many years, he made an annual journey to Nebraska, always with a group of students, to attend the Berkshire Hathaway annual shareholders meeting, and often to attend a private meeting with the so-called Oracle of Omaha himself.

With his expertise, Kass is often asked to opine on a business luminary who has been hailed as a “Warren Buffett of” something, or someplace.

Most recently, he was asked about money manager Neil Woodford, who was said to be the “Warren Buffett of Britain,” before his spectacular flameout in 2019. Woodford’s empire – with more than 15 billion British pounds under management – crumbled last year, crushed by the asset manager’s newfound inability to pick stock winners and newfound propensity to pick stock losers. Today, he’s under investigation by U.K. financial authorities.

Kass calls it hubris.

“Woodford is another failed portfolio manager who does well for 20 or 25 years, and then blows up – loses everything. There are many examples similar to Woodford, and only one Warren Buffett,” he says.

Why the obsession about who will be the next “Warren Buffett” or who is the “Warren Buffett” of some country or some investment sector?

“The answer,” Kass says, “very simply is that Warren Buffett has been the only investor in the world who has been among the top three wealthiest people for decades. He has achieved his wealth and status primarily by buying and holding a portfolio of stocks of large American companies that are industry leaders in terms of growth and profitability.”

Buffett has said the quality needed to succeed as an investor is a steady temperament, Kass says, an ability to handle sharp market swings – favorable and unfavorable. In terms of intelligence, Buffett has said an above average IQ of 120 is plenty. “Indeed, Buffett has joked that if someone has an IQ of 150, they should sell the extra 30 points above 120.”

It’s temperament, not intelligence, that dooms the fortunes of the other “Warren Buffetts,” Kass says. “Eventually, it’s overconfidence on the upside and/or panic selling on the downside.”

It is important to note that Warren Buffett’s Berkshire Hathaway, between 1965 and 2018, grew at a compounded annual return of 20.5% per year, compared to 9.7% for the S&P 500 (with dividends included). $1,000 invested with Warren Buffett (Berkshire Hathaway) in 1965 would be worth $23.6 million today. By contrast, $1,000 invested in the S&P 500 during the same time period would be valued at $148,300 today. “He achieved this result without leverage (debt) and derivatives,” Kass says. “It was plain vanilla investing. He has achieved high returns with low risk.”

“Warren Buffett has succeeded,” Kass continues, “because of his rare combination of intelligence, analytical ability, strong finance background, and, of course, temperament. His preferred holding period for his stock investments is ‘forever.’ How many investors would not panic and sell when their investments decline in value by over 50% in a short period of time, such as during the Great Recession of 2007-2009, or by 23% on one day, October 19, 1987 (Stock Market Crash of 1987)? Very few.”