Buffett Beats Activists at
Berkshire, Rather Than Joining Them
October 14, 2015 — 8:00 AM EDT
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
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.