The Financial Times Alphaville Blog is a great read and you should consider adding it to your roster. It is not behind a paywall, so check it out (I also subscribe to the FT). Today, Alphaville published The world is overweight Baba, which prompted another thought about Buffett, his opportunity set, and Apple (“AAPL”).
The focus of the Alphaville post is that the world’s active managers are overweight Alibaba (“BABA”) more than any other stock. The post cites data (and a pretty slick chart) from UBS. The BABA comparison is versus the MSCI All World index.
My eye, however, drifted over the most underweight column. The number one underweight security is AAPL. I also noted that active managers are .7% underweight AAPL and only .3% overweight BABA. So the “active share,” or deviation from the cap weighted index, is larger against AAPL than in favor of BABA (also, wow none of these figures are huge…apparently reflecting tons of “closet indexers”).
The post also includes the same data/chart for U.S. Large Caps. There the active managers are underweight AAPL by 1.5%. I also note that one of the other largest deviations is underweight Berkshire by .6%.
AAPL is the largest new and most recent purchase of Berkshire. Buffett has stated he is the one behind that purchase and was coy about continuing accumulation on his most recent CNBC appearance.
I wonder if Buffett was aware of this relatively large active bet against AAPL when he conducted his analysis, or if he consults this data on occasion. I could certainly see the value of being aware that this is the status of the playing field, but it is probably reflected in his fundamental and valuation analysis.
Buffett has increased Berkshire book value by 1 million percent over the past 50+ years and destroyed the index. He is the GOAT.
Active managers, as a whole, are virtually certain to lose to the index and have performed accordingly. See The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits).
Both the index and the GOAT are betting on AAPL taking the other side of the active managers. My money would be on the index and the GOAT versus the goats!