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, so I agreed.
Performance
I picked four stocks and committed to not touching the investments for the duration of the bet. I haven’t (and won’t) traded or rebalanced in any way. Here were my picks:
- Amazon: Wait, they sell more than books? And what’s this AWS thing?
- Alibaba: China rising.
- Berkshire Hathaway: Consistently undervalued.
- Alphabet: A behemoth that’s just getting started. Waymo is gonna win.
In year 1, I beat the S&P, but not by much:
In year 2, my lead narrowed:
Year 3 was very good. My total return was 73.42% while the S&P’s was 39.28%:
Year 4: And now we’re at the present day when my lead over the S&P 500 narrowed. My total return is 95.69% while the S&P’s is 77.93%:
What Happened in 2021?
Google (Alphabet) had a really great year. Alibaba (and Jack Ma) had a very, very bad one. Amazon was meh, but it’s still beating the S&P overall. Berkshire Hathaway had a good year but is still trailing the S&P over the duration of the experiment.
While I’m still beating the S&P 500, I worry about the remaining 6 years:
- Regulation? Break up? American politicians don’t agree on much, but one thing they both equally seem to hate is Big Tech. Perhaps my two winners (Amazon and Google) will get smacked down by Washington DC? Dare I say they may deserve it too.
- Inflation: Growth stocks don’t do well in times of inflation. When rates rise, money flows out of growth stocks to safer havens.
But if I’ve learned anything, it’s that trying to predict anything beyond what you’ll have for breakfast is a futile exercise.
As for the competition, DGI hasn’t posted his numbers yet, but I’m 99.9% sure that I’m still ahead. I’m more curious to see if his dividend strategy has caught up to the S&P 500. In his last update, he was lagging:
…mine is up by 37.98%, vs 48.24% for S&P 500.
-DGI
However, I think that 2022 could be the year the DGI shines as I believe his portfolio is more inflation-friendly.
Happy New Year DGI and I hope your 2022 is the best yet!
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i think amazon is due to outperform as the stock has been a laggard for about 18 months now. the business is still doing great but hasn’t reflected in the share price. i think you bought BRK-B at the right time after a period where they lagged for a number of years. i got rid of my alibaba stock and thankfully made money but i couldn’t take the chinese government meddling with the company.
i gotta say i agree that growth may take a pause. my portfolio has been bloodied the past 6 months but that’s the price of admission to swim in the growth stock pool. good luck.
freddy smidlap recently posted…We Bought Unity $U and Walker & Dunlop $WD – Malevolent Missy Stock Series #29
Amazon is a curious case. I think it will be fine long-term, but it has a lot of power and I can see the government stepping in.
Alibaba: You need a strong stomach to hold Chinese stocks!