In December of 2017, Dividend Growth Investor (DGI) asked me if I’d like to duplicate the famous Warren Buffett bet. For those unfamiliar, in 2008 Buffett famously challenged the hedge fund industry:
Can you beat the S&P 500 over a 10 year period?
Buffett won as the hedge fund got clobbered by the S&P 500.
But, I like fun experiments and a little drama, so I agreed.
I picked four stocks:
- Amazon: Good luck disrupting this one. And what’s this AWS thing?
- Alibaba: China rising.
- Berkshire Hathaway: Consistently undervalued. Munger/Buffett.
- Alphabet: A behemoth that’s just getting started. Waymo is winning.
For the first 4 years, everything was great. Then 2022 happened:
- Inflation went up
- Interest rates went up
- Stocks went down
With dividend reinvestment, the S&P 500 is up 56.35% while I’m up 29.10%:
And here is what my individual holdings looked like on 12/31/2022:
Only 1 company, Google, is beating the S&P. Alibaba is negative!
Here is what I think of these stocks now:
- Amazon: Still a behemoth. And its advertising business is crazy good. I’m still a believer.
- Alibaba: No clue. Its CEO, Jack Ma ran afoul of the China Communist Party. You don’t want to run afoul of the CCP.
- Berkshire Hathaway: Buffett and Munger are still going strong but I’d be surprised if they’re both still alive in another 5 years when this experiment is over. Mr. Market will temporarily punish Berkshire Hathaway when the transition happens.
- Google/Alphabet: Still a software powerhouse. If I had to have my money in one stock for the next 10 years, this would be it.
Brighter days ahead? The end of 2022 was an interesting time. Everything was bottoming out. Some of this was probably due to tax-loss harvesting. In the weeks since then, I’m already up 13%.
What About DGI?
DGI hasn’t post his returns yet, but I’ve been communicating with him. His portfolio lagged the S&P for the first 4 years, but he’s pulled ahead in year 5. This makes perfect sense since his holdings are less growth oriented.
Congratulations DGI on a winning 2022!
Where Do We Go From Here?
I have no clue what the next 5 years will look like:
- When will the war in Ukraine end?
- Will China invade Taiwan?
- Who will lead Berkshire Hathaway once Buffett and Munger are done? (Probably Greg Abel.)
- Is Waymo’s autonomous taxi fleet scalable?
- Will ChatGPT disrupt Google?
Playing a little with stocks has been fun. This is a great luxury since I oversaved and can afford to be a little reckless. However, most future money will flow in the direction of index funds. I don’t want to spend my time thinking about Waymo (autonomous cars) or dry battery electrode (Tesla) or the Metaverse (Facebook) or how Amazon’s ads are doing.
It’s also very hard to predict when a company has peaked. So even if you pick a winner, you better sell it before the stock goes to $0 as most will. VTSAX will not go to $0.
More 1500 Days!!!
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