Even lackluster HSI gave Berkshire Hathaway a run for its money

Warren Buffett's Berkshire Hathaway ended 2019 with a really moderate full-year performance, only 11 percent better than it was placed in 2018.

Despite the increase, the fund merely gained a little more than the Hang Seng Index - which rose 9.1 percent - while losing out significantly when compared to the three major US indices, with the Dow Jones Industrial Average gaining 22 percent, S&P 500 rising 29 percent, and Nasdaq Composite jumping 35 percent.

It's no wonder that some investors of Berkshire Hathaway complained that Buffett is no longer at the top of his game and has turned into a miser.

Consider this: if it was not overweight in Apple, Berkshire Hathaway might not have even matched the HSI. Apple's shares hit the US$300 mark for the first time in December and rose by nearly 90 percent in 2019, and thanks to the strong performance of this rare tech stock in the fund, Berkshire Hathaway recorded robust growth in the fourth quarter.

It was a little under 10 years ago that Buffett first ventured into tech stocks when he bought into IBM but it proved a bitter pill which made him become averse to tech stocks until early 2018, when he started investing in Apple.

But his huge success in Apple has now passed into history.

There are no "ifs" in investment, but if Buffett at the time had not only bought a large amount of Apple but also some Amazon (though he did buy a small amount of Amazon later at a high price), Facebook and Google shares, these stocks would have yielded him a rich harvest by now and helped forever cement his place in history as the "god of stocks."

Bloomberg's Billionaires Index shows that though Amazon founder Jeff Bezos lost US$10 billion last year, he still ended 2019 as the world's richest person, while Buffett came in fourth place.

Don't get me wrong. I mean no disrespect and I know I am not qualified to dis the Oracle of Omaha, as he is also known.

I just want to say that if Buffett - who has always respected "value investing" - had been born a few decades later he would have bought Facebook, Google and other growth stocks in the technology sector.

However, Buffett does not need our pity for not buying Amazon and Google at that time. Indeed, everyone makes mistakes in investment and there is no such thing as the perfect market. No matter how efficient the market is there will always be a blind spot and even the god of stocks has his limitations.

Buffett believes that US equities are too expensive and that the valuations of many appealing stocks valuations are not attractive.

Berkshire Hathaway had a record US$128.2 billion (HK$996.5 billion) in cash at the end of the third quarter, and this might have hit a trillion Hong Kong dollars by now.

Rumor has it that Berkshire Hathaway is now preparing for an important acquisition but though there's no evidence to back this, it indicates that Buffett is likely under pressure by the fund's shareholders.

If Buffett was not in control of the fund, his pro forma successor would probably wake up and smell the roses, and take the plunge.

The god of stocks has an objective gauge for reckoning that equities are too expensive. The Buffett indicator - the ratio of total market cap to US GDP - has skyrocketed to 139.3 percent, more than the 136.9 percent peak witnessed during the dotcom bubble in 2000.

It is easy to imagine that Buffett must be thinking that the new economy is much like the heady days before the dotcom bubble - and will collapse sooner or later.

Definitely, the US Federal Reserve's quantitative easing over the last decade and assets inflation are emerging developments for everyone, including Buffett, let alone that rare phenomenon of negative interest rates that has reared its head in recent years.

All Buffett can do now is wait and wait, since the tide will ebb one day in the future and he can invest in those stocks then. But he's nearly 90 while Berkshire Hathaway vice chairman Charlie Munger is even older.

Investment is a race against the time, where one spends time in exchange for returns and the saying goes that whoever stays the longest wins. But Buffett no longer has time on his side.

But if you believe Buffett's revered investment philosophy is still held in high esteem and can stand the test of time, we will only know the answer in the years ahead as to whether he has just gown old or hit another pinnacle in his illustrious career.