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Source: Bloomberg, October 14, 2015 article


 

Buffett Beats Activists at Berkshire, Rather Than Joining Them


by David Wilson


October 14, 2015 — 8:00 AM EDT


►  Company's shares outpace activist-fund index in bull market

►  Activists are `like sharks: they've got to keep swimming'

Warren Buffett has stock performance on his side in criticizing activist investors and the strategies designed to help companies avoid them, as he did yesterday.

The chart below compares the shares of Buffett’s Berkshire Hathaway Inc. with an index of activist hedge funds since March 2009, when stocks entered a bull market. Hedge Fund Research Inc. compiles the activist indicator and a broader hedge-fund gauge, also used in the chart, on a monthly basis.

  Warren Buffett, chairman and chief executive officer of Berkshire Hathaway. Photographer: Scott Eells/Bloomberg


Berkshire’s Class A shares surpassed the activist index in 2013, and maintained their bull-market lead this year even as they dropped. The Omaha, Nebraska-based company ended last month with an increase of 148 percent, beating a 100 percent advance for the activists and a 50 percent gain for the Hedge Fund Research composite index.

Activists are “like sharks: they’ve got to keep swimming,” Buffett said yesterday at Fortune’s Most Powerful Women Summit in Washington. “They stretch for targets and you’re seeing that.” Companies looking to keep them away are better off focusing on performance and shareholder communication than putting up defenses promoted by securities firms, he said.

Buffett said he prefers to invest in companies where he’s able to “join in the spirit of the whole organization,” though he added that activists have a place where businesses aren’t being managed in the interests of shareholders.

One of the biggest activist investors, billionaire Carl Icahn, delivered bull-market gains comparable to those of Berkshire. Shares of his publicly traded investment partnership, Icahn Enterprises LP, rose 149 percent from March 2009 through last month. Icahn and another activist, Bill Ackman, have criticized Buffett’s view of their strategy.

 


© Bloomberg L.P.

 

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