I refuse to believe, though, that people with a long track record of investment prowess have suddenly become stock-market eunuchs.
So I think it’s worth looking not only at what these four men did wrong last year, but at what they’re doing with their portfolios today.
Three of these four celebrated investors run mutual funds, so their results are easy to track:
-- The DWS Dreman High Return Equity Fund fell 45 percent - - including reinvested dividends -- in 2008, and the fund’s board has since deposed Dreman as manager.
-- Heebner’s CGM Focus Fund dropped 48 percent. It had ranked in the top 1 percent of its peer group in 2000, 2001, 2003, 2005 and 2007.
-- A 55 percent decline cursed Miller’s Legg Mason Value Trust. From 1991 through 2005, Miller had the investment world’s longest winning streak, beating the Standard & Poor’s 500 Index 15 years in a row.
Buffett is the chief executive officer and 33 percent owner of Berkshire Hathaway Inc. Berkshire’s stock fell 32 percent last year.
Thus, Buffett was the only one of the four who beat the 37 percent loss for the S&P 500, but it’s safe to say he wasn’t pleased. He compared the experience of investors last year to that of “small birds that had strayed into a badminton game.”
I believe that these investors’ past success, and investment experience, worked against them in 2008. Experience may have told them that the U.S. stock market doesn’t decline much more than 35 percent, especially when interest rates aren’t high or rising.
Their judgment may have told them that, after the sour tone of the first nine months of the year, a rebound was likely. Instead, stocks collapsed in October and November.