MEBISODE: Even Berkshire Underperformed - The Meb Faber Show - Better Investing Recap
Podcast: The Meb Faber Show - Better Investing
Published: 2026-03-03
Duration: 14 min
Summary
In this episode, the discussion centers on the lessons learned from Warren Buffett's Berkshire Hathaway's historical underperformance, particularly during the dot-com boom, and how these insights apply to evaluating the Cambria Shareholder Yield ETF (SYLD) during its recent struggles. The core message emphasizes the importance of patience and a long-term perspective in investing, particularly when facing periods of underperformance.
What Happened
The episode begins with a celebration of Warren Buffett's legacy, noting that a $10,000 investment in Berkshire Hathaway in 1965 would have grown to over $600 million by the end of 2025. However, the hosts highlight a pivotal moment in 1999 when Berkshire significantly underperformed the S&P 500 by 40 percentage points, leading to skepticism about Buffett's investment prowess. In hindsight, this period turned out to be an opportunity as Berkshire more than doubled while the S&P remained flat for a decade.
Transitioning to the present, the hosts introduce the Cambria Shareholder Yield ETF (SYLD), which, despite a strong long-term track record, is facing challenges and outflows. The hosts pose critical questions about the fund's strategy and whether investors should abandon it after recent underperformance. They emphasize that many investors are too quick to judge performance over short time horizons and often fail to recognize that even successful funds experience rough patches, similar to Berkshire's history.
Key Insights
- Investors often panic during periods of underperformance, missing out on potential future gains.
- Long-term performance evaluation requires patience and a broader time horizon beyond just a few years.
- Historical context shows that even top investments like Berkshire Hathaway have had significant periods of underperformance.
- Rolling returns analysis provides a more comprehensive view of an investment's consistency and durability.
Key Questions Answered
How did Berkshire Hathaway perform during the dot-com boom?
In 1999, Berkshire Hathaway underperformed the S&P 500 by 40 percentage points, with the stock down around 20 percent while the overall market was up about 20 percent. This led to speculation about Warren Buffett losing his 'magic touch,' as highlighted in a Barron's magazine cover story questioning Buffett's investment prowess after decades of success.
What should investors consider when facing underperformance?
Investors often have a woefully short time horizon when evaluating their portfolio results. Many feel compelled to make quick decisions based on recent performance, which can lead to panic-selling during rough patches. The episode encourages investors to adopt a longer perspective, noting that even successful funds like Berkshire Hathaway have periods of underperformance.
What is the significance of rolling returns in investment analysis?
Rolling returns assess how an investment performs over fixed periods across various starting points, providing a deeper understanding of consistency and durability. This method allows investors to evaluate how their investments would have fared over different timeframes, rather than relying solely on annual performance, which can be misleading.
How does the Cambria Shareholder Yield ETF compare to its category?
Despite a solid long-term track record that places it in the top decile of its Morningstar category, the SYLD ETF has struggled recently, ranking in the bottom 11% for 2025. This discrepancy raises questions about whether the strategy is still sound or if it's time for investors to reconsider their positions.
What can investors learn from past performance of successful funds?
Even the best investments, like Berkshire Hathaway, have years where they underperform. The hosts emphasize that investors should expect periods of underperformance from their holdings and consider them as part of a longer journey. Understanding this can help differentiate between a genuine strategy flaw and a temporary setback.