The Economist sees fundamental problems with value investing stemming from the structure of the new economy. With assets increasingly intangible rather than tangible, investors may find it more difficult to value companies using traditional methods. And with more young firms exploiting increasing returns to scale to grow exponentially, the maxim that “what goes up must come down” is being called into question.
It has been a “spring of discontent” for Berkshire Hathaway this year as investors increasingly run out of patience with investment guru Warren Buffett. Still considered one of the world’s most admired investors, his value investing strategy increasingly looks out of step with the post-pandemic stock market.
The “Oracle of Omaha’s” reputation has increasingly come under scrutiny as his strategy of buying undervalued stock saw Berkshire missing out on the tech boom. Over the past five years, Berkshire’s total returns were 14% compared to the S&P 500’s 18%.
