Warren Buffett - The Investment Guru
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ICMR HOME | Case Studies Collection
Case Details:
Case Code : LDEN027
Case Length : 17 Pages
Period : 1970-2003
Pub Date : 2003
Teaching Note : Available
Organization : Berkshire Hathaway group of companies
Industry : Investment
Countries : USA
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"Warren Buffett should say, 'I'm sorry.' How did he miss
the silicon, wireless, DSL, cable, and biotech revolutions?"
- Harry Newton, publisher - Technology Investor Magazine in
early 2000.1
"It's a religious revival, and Buffett is our evangelist!"
- Michael Cleveland, Investor - Berkshire Hathaway,
in February 2001 commenting at the Annual Stockholders meeting of Berkshire
Hathaway.2
Return of the Oracle (of Omaha)
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The year 2002 marked the return of Warren Buffett (Buffett) - popularly known as
the 'Oracle of Omaha' for his unparalleled investing skills. However, the
efficacy of his investment skills was questioned during the late 1990s. While
the entire world was investing in technology stocks, Buffett stuck to his
favorite old economy stocks. He refused to acknowledge the technology boom and
declined to join the bandwagon. During the technology boom of the late 1990s,
investors raked in fortunes by investing in technology stocks. Buffett's
investment company however took a beating at the stock market. In 1999,
Berkshire Hathaway3 stock underperformed
Standard & Poor's 500 index by 20.5 points (Refer Exhibit I).
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Many Wall Street analysts felt that Buffett had lost his touch. They felt that by ignoring the
technology boom Buffett was committing biggest blunder of his career.
The dotcom bust in the early 2000s changed the experts' opinion of Buffett's
investing skills. The dotcom bust resulted in huge losses for the stock
markets and pushed many companies into bankruptcy.
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Commenting on the dotcom boom, Buffett said, "It was a mass hallucination, by far the biggest in my
lifetime."4
By the end of 2001, with the stock markets once again rallying back on the
old economy stocks, analysts started accepting the supremacy of Buffett's
expertise in reading the markets. Commenting on his investment strategy,
Buffett said that he concentrated on the companies and not on the Wall
Street index. Fortune wrote in 2002, "More and more people seem to be
expecting (or at least hoping) that he will step in and save them from their
own past mistakes. Because he controls, through his company Berkshire
Hathaway, one of the most liquid sources of capital on earth."5 |
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