Did Warren Buffett Move the Goalposts in the Latest Letter?

Did Warren Buffett Move the Goalposts in the Latest Letter?

February 28, 2015 $brk-a, $SPY, $vlue
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It appears even the Oracle of Omaha may be vulnerable to short term performance pressures. The Berkshire report came out today, and it has magically changed formats to deemphasize the fact the book value per share has lagged the S&P 500 for 5 out of the last 6 years.

A pretty terrible streak of book value performance (explained in the opening discussion).

Examining reporting in the Old and New Formats

First, a look at Berkshire performance in the “old reporting format,” which is NOT included in this year’s report.

Old Reporting Format
1) Berkshire BV 2) S&P TR 1-2 Difference
2009 19.8 26.5 -6.7
2010 13 15.1 -2.1
2011 4.6 2.1 2.5
2012 14.4 16 -1.6
2013 18.2 32.4 -14.2
2014 8.3 13.7 -5.4

Next, a look at the performance as reported in the “new” format.

New Reporting Format
1) Berkshire BV 2) Berkshire MV 2) S&P TR
2009 19.8 2.7 26.5
2010 13 21.4 15.1
2011 4.6 -4.7 2.1
2012 14.4 16.8 16
2013 18.2 32.7 32.4
2014 8.3 27 13.7

Notice how the difference in reporting changes the flavor of the results?

A few key differences in reporting that shift focus from relative performance:

  1. No relative results–which would be horrific the past few years!
  2. Berkshire Market Value included–which looks a lot better than book value performance!

The logic for the change as stated by the Oracle:

During our tenure, we have consistently compared the yearly performance of the S&P 500 to the change in Berkshire’s per-share book value. We’ve done that because book value has been a crude, but useful, tracking device for the number that really counts: intrinsic business value.

He goes on to justify the “change in reporting”:

Today, our emphasis has shifted in a major way to owning and operating large businesses. Many of these are worth far more than their cost-based carrying value. But that amount is never revalued upward no matter how much the value of these companies has increased. Consequently, the gap between Berkshire’s intrinsic value and its book value has materially widened.

There is certainly some validity to the change in reporting metrics.

However, we must ask the question:

The old reporting format was good to go from 1965 to 2013…

Why change now?

Did it have anything to do with the worst book-value performance run in history for Berkshire Hathaway?


Not saying, I’m just saying…

Reporting Differences Illuminated

In the old days there were 3 columns:

  1. Book value per share
  2. S&P 500 Total Return
  3. Difference between 1 and 2

See below…

Pre 2014 performance format:


In the newest report there are 3 columns:

  1. Book value per share (Berkshire)
  2. Market value per share (Berkshire)
  3. S&P 500 Total Return

Post 2014 Format:



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About the Author

Wesley R. Gray, Ph.D.

After serving as a Captain in the United States Marine Corps, Dr. Gray received a PhD, and was a finance professor at Drexel University. Dr. Gray’s interest in entrepreneurship and behavioral finance led him to found Alpha Architect. Dr. Gray has published three books: EMBEDDED: A Marine Corps Adviser Inside the Iraqi Army, QUANTITATIVE VALUE: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors, and DIY FINANCIAL ADVISOR: A Simple Solution to Build and Protect Your Wealth. His numerous published works has been highlighted on CBNC, CNN, NPR, Motley Fool, WSJ Market Watch, CFA Institute, Institutional Investor, and CBS News. Dr. Gray earned an MBA and a PhD in finance from the University of Chicago and graduated magna cum laude with a BS from The Wharton School of the University of Pennsylvania.