A pretty cool thing that Warren Buffett did is that he bought a few billion dollars’ worth of Apple Inc. stock in 2016, when it was at around $25 per share, and then, over the course of nine years, it went up to about $200 per share. [1]  The Wall Street Journal this weekend had a recap of that trade, which has made a lot of money for shareholders of Berkshire Hathaway Inc., Buffett’s company. Here is some of the analysis that Berkshire did:

Buffett wanted a company with a reasonably cheap price/earnings multiple of no more than 15, based on the next 12 months’ projected earnings, The Wall Street Journal previously reported. Berkshire managers had to be at least 90% sure that the stock would generate higher earnings over the next five years. And he wanted Berkshire to be at least 50% confident that the company would grow a minimum of 7% annually for at least five years. ...

Buffett, a flip-phone user at the time, was hardly a techie. But he saw the hold the company had on its customers. Buffett’s grandchildren were iPhone devotees, and Apple’s customer retention rate was about 95%. 

Buffett and his lieutenants did some research, saw that people liked the product, saw that the price/earnings multiple was reasonable, and concluded that the company’s earnings would grow in the medium term. So he bought the stock, and it went up.

The Apple trade was in some ways singular — “I’m somewhat embarrassed to say Tim Cook has made Berkshire a lot more money than I’ve ever made,” Buffett told Berkshire Hathaway’s shareholders Saturday — but in other ways it fits the pattern of Buffett’s greatest hits. He bought stock in the Coca-Cola Co. in 1988 and has owned it ever since. He bought a stake in American Express Co. in 1991 and has owned it ever since. [2]  In his 2023 letter to shareholders, he wrote:

During 2023, we did not buy or sell a share of either AMEX or Coke – extending our own Rip Van Winkle slumber that has now lasted well over two decades. Both companies again rewarded our inaction last year by increasing their earnings and dividends. Indeed, our share of AMEX earnings in 2023 considerably exceeded the $1.3 billion cost of our long-ago purchase.

Both AMEX and Coke will almost certainly increase their dividends in 2024 – about 16% in the case of AMEX – and we will most certainly leave our holdings untouched throughout the year.

At Berkshire’s shareholder meeting this weekend, Buffett announced that he will retire at the end of the year, when he will be 95 years old; his lieutenant Greg Abel will take over Berkshire Hathaway. Buffett is by consensus the best investor ever, but he is a particular kind of investor: the normal kind. He read a lot of companies’ annual reports on Form 10-K, identified the companies that he thought were good and then bought their stocks. He made his money by being right a lot, by buying stocks that would go up and then holding them as they went up. You could do that. I mean, it would be weird if you could do it as well as Buffett — he’s abnormally good at it, and he has had a lot of practice — but what’s stopping you? You could read a lot of 10-Ks. He bought stocks like Apple and Coke. You probably like iPhones and Coke. This stuff is easy!

Obviously this is exaggerated, and Buffett’s actual performance came from a range of things that ordinary investors couldn’t actually do. Most of Berkshire Hathaway’s investments are whole companies, where Berkshire controls the company and improves operations, rather than publicly traded stocks like Apple and Coke. [3]  Buffett gets cheap long-term leverage from insurance float, amplifying his returns with less risk than other sources of leverage. Because he is a famously good investor, his investment in a company can make the company more valuable, which  increases his returns and also means that companies offer him attractive deals. And much of his success came from his network, not just reading 10-Ks.

But quite a lot of his legend, and much of the performance, really did come from doing fundamental analysis to buy public stocks that then went up. [4]  He was the very best player of a pretty accessible game. Anyone could do the thing that Buffett did, though not as well for as long.

Isn’t that strange, though? At the Wall Street Journal, Jason Zweig has a good appreciation of Buffett titled “Why There Will Never Be Another Warren Buffett.” Shouldn’t people get better at things? Modern investors have far more access to data and cheaper trading costs and better computers. Why is a 94-year-old the best investor ever, with no obvious successor? 

Surely the answer has a form like “yes, everyone is much better at investing now, which makes it more or less impossible to stand out by as much as Buffett did over the course of his career.” Reading 10-Ks worked so well for Buffett that now everyone reads 10-Ks, so reading 10-Ks is no longer a big advantage.

And the thing that Buffett did — long-term buy-and-hold investments in public stocks based on fundamental analysis — is pretty out of vogue these days, at least for professional investment managers. If you launched a business today whose proposition was “I will buy a few dozen stocks of large public companies and hold them for decades, but the trick is that I will pick the right stocks,” that would be a hard sell, as Bill Ackman found out recently. Modern academic theories, and institutional allocators, are suspicious of the idea that buying and holding big stocks can add much value. Modern finance views stocks mostly as a set of correlations to the market and other factors; if you just buy some big stocks, most of what you are getting is the market return, and anyone can get the market return cheaply by buying an index fund. It’s not impressive to buy stocks that go up when the market goes up; what’s impressive is to find sources of return that are independent of the market.

Similarly, modern theories are suspicious about distinguishing skill from luck, and one important way to do that is to increase the number of decisions. If you flip a coin 10 times in a row and it lands on heads 8 times, you might be good at flipping coins, or you might have had some good luck that will revert to the mean. If you flip a coin 10,000 times and it lands on heads 5,500 times, you’re probably good at flipping coins. The more decisions an investment manager makes, the more confident you can be about evaluating her process. A manager who makes 100 trades a day and makes money on 55% of them is probably skilled. A manager who buys 10 stocks and holds them for 10 years, and makes money on 8 of them, could easily be lucky. The modern ideal — at quantitative hedge funds and proprietary trading firms and multistrategy funds — is making lots of independent investment decisions and being right 55% of the time. It’s not buying Apple and being right for a decade. [5]

If there is a successor to Buffett’s title of greatest investor ever, it’s arguably Jim Simons, who is not known for any particular stock pick but rather as a pioneer in quantitative investing who used algorithms to make lots of trades and win a bit more than he lost, with the results aggregating to a steady long-term winning record that stands comparison with Buffett’s. Simons died last year, but he has more obvious successors than Buffett does: His firm runs great without him, and there are many other quantitative firms trying to do the same sort of thing.

When Buffett started out as a professional investor, he was in some ways working at the cutting edge of investment science: He was a disciple of Benjamin Graham, the “father of value investing,” and used rigorous fundamental analysis to invest more rationally than his competitors and make money. The science has moved on. In public markets, sophisticated hedge funds look for uncorrelated alpha and rigorous skill, and the folksier “buy safe, quality stocks at reasonable prices” approach can be approximated cheaply with factor exchange-traded funds. If you want to do fundamental analysis and buy good businesses cheap, these days you get into private equity, [6] where you can make long-term investments in businesses, though not in Apple. 

Warren Buffett is a financial celebrity who buys stakes in large public companies that he thinks are good, and holds them as they go up. That is terrific work if you can get it, but I don’t think anyone else can.

Jason Zweig notes that one of Buffett’s big advantages is that he runs permanent capital and so can invest countercyclically: “Cash can’t come pouring in from new investors, or get yanked out by fleeing investors, at the worst possible times.” Meanwhile if you run a hedge fund and don’t have permanent capital, you know what to do, right? We have talked about it before, and at this point I assume it is taught on the first day of business school. It’s:

1. You have a good run of returns.
2. You demand that investors lock up their money for a long time.
3. The investors think: “Yes, this fund is good, it keeps having good returns, and the manager wants a long lockup, so I guess we need to agree to a long lockup to continue to have access to the good returns.”
4. They sign the lockup.
5. You have a bad run of returns.

Steps 2 through 4 are essential. Step 5 is not essential; if you can just have good returns forever that is cool too. Step 1 is probably pretty important, though there is perhaps a narrow path for omitting it entirely and just starting with a long lockup if you have a fancy pedigree and a good pitch. Replacing Step 1 with a run of bad returns probably doesn’t work, though. If your model of a hedge fund manager is “sometimes you make money, and other times you lose money,” it is very very very important to make money first. [7]  Make money, put up gates, lose money: That works great. Lose money, put up gates, make money: No, much harder.

The Wall Street Journal reports:

A highflying hedge fund blocked investors from leaving at the start of the year. It promptly went on a losing streak. 

Armistice Capital, a stock-picking firm that began 2025 with about $2 billion in assets under management, lost money in April for the third consecutive month, people familiar with the matter said. Investors unhappy with the performance can’t leave anytime soon. Under new terms that went into effect Jan. 1, the firm locked up investors’ money for all of 2025, The Wall Street Journal previously reported.

A 19% decline in March, Armistice’s worst monthly performance since its founding in 2012, left it down 18% for the first quarter. Its April loss was much smaller at about 0.5%.

Yes the very most important element of hedge fund manager skill is having your worst monthly performance the quarter after you put up gates, not the quarter before.

Elsewhere in sequencing, here’s a Bloomberg News story from Friday:

“I’m going to focus today on one of ICI’s strategic priorities: giving retail investors real access to private markets,” said Eric Pan, the chief executive officer of the Investment Company Institute, which organized the three-day conference that ended Friday. “As we look to the future, we need to continue pushing the boundaries, and private markets may well be an important new opportunity for retail investors.”

For an industry built on liquidity, transparency and public markets, the trend was clear: Private assets, once reserved for institutional investors and the ultra wealthy, are fast becoming mainstream.

And here’s a different Bloomberg News story from Friday:

Private credit fund investors are offloading stakes at significant discounts ahead of more potential pain for the US economy, Oaktree Capital Management Co-Chief Executive Officer Robert O’Leary said.

Oaktree sees more chances to buy marked-down assets in continuation vehicles and in secondary markets, where private asset holders sell stakes in relatively illiquid funds to bring returns to their own investors. That activity has been building in private equity for some time, but credit investors are now putting up bigger trades, O’Leary said this week in a telephone interview.

Discounts are starting at about 90 cents on the dollar and going as low as the “50 cent range,” he said Friday in a separate Bloomberg Television interview. Limited partners are taking matters into their own hands given a desire “to get out of this before a fall.”

He said the current discounts don’t include a lot of deterioration in credit quality, and as the economic outlook worsens, those discounts will get bigger. 

I have generally explained the push to sell private assets to retail investors in simple, sort of cycle-neutral terms. There is a lot of retail money, and private credit and equity businesses have gotten so big that they need big new sources of incremental dollars. Meanwhile traditional retail asset managers are facing huge fee pressures, since these days retail investors can get low-cost index funds, commission-free trades and cheap robot advice; private market fees remain high. Finding new buyers for alternative asset managers’ products, and finding new higher-margin products for traditional asset managers, are obvious imperatives.

But I suppose a more cynical market-timing-based explanation is also available, along the lines of “sophisticated institutions will pay 50 cents on the dollar for this stuff so let’s sell it to retail at 100.”

Sure okay whatever:

A small logistics company’s plan to hold President Donald Trump’s memecoin as a treasury asset is fueling its blistering stock rally.

Freight Technologies Inc. said it will use proceeds from the sale of convertible notes to buy the Trump digital token. The company intends to start with a $1 million offering, and may raise up to $20 million. The penny stock more than doubled on Friday, giving it a $4.71 million market value. The move followed a more than 20% swing up and then back down in the two trading sessions after Wednesday’s morning announcement.

The Houston-based company said in a press release that it is one of the first public companies to make the Trump coin “a cornerstone of its digital asset strategy.” 

Why would a company make the Trump coin a cornerstone of its digital asset strategy? Well, I can think of two possible reasons. One is that the stock went up: We have talked a lot about the fact that the US stock market seems to put a premium on crypto asset holdings, so if a company buys $1 of crypto its stock market value goes up by $2. It is hard to really know what to make of this, but surely there is some sort of memetic first-mover advantage involved: MicroStrategy can get lots of investor attention and a big stock premium for buying a lot of Bitcoin, but perhaps the 100th company to do that can’t. And so if you want to get into this game it helps to pick a new lane; the Trumpcoin lane has a lot of memetic value and seems to have been available.

The other reason is that the economic value proposition of Trumpcoin is pretty clear. The value of Trumpcoin is that it has a public immutable ledger that allows you to prove that you have handed a bag of cash to Donald Trump. (Not quite literally — purchases of Trumpcoin do not necessarily go to him directly — but pretty close.) Why would you want to prove that? Well, perhaps you want something from Donald Trump. Would publicly handing him a bag of cash help you get it? I don’t know! I mean, we talked last month about how Trump is hosting a dinner for big holders of his memecoin. Seems like it could be helpful to go to that dinner? 

Freight Technologies Inc. appears to work on freight technologies for trade between the US and Mexico, so you could see how it might be interested in influencing Donald Trump. And its press release specifically says that it is planning to buy Trump’s memecoin to influence his policies:

Javier Selgas, Chief Executive Officer of Fr8Tech added, “At the heart of Fr8Tech’s mission is the promotion of productive and active commerce between the United States and Mexico. Mexico is the United States’ top goods trading partner, with Mexico being the leading destination for US exports and the top source for US imports. As US Treasury Secretary Scott Bessent recently stated, ‘I wish to be clear: America First does not mean America alone. To the contrary, it is a call for deeper collaboration and mutual respect among trade partners.” ...

“We believe that the addition of the Official Trump tokens are an excellent way to diversify our crypto treasury, and also an effective way to advocate for fair, balanced, and free trade between Mexico and the US.”

Is buying the president’s memecoin in fact an effective way to advocate for trade between Mexico and the US? I don’t know! I guess they could advocate for it at the dinner.

Elsewhere here’s a biopharmaceutical company that’s pivoting to become a Dogecoin miner; why not.

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