Over the past week, I have outlined the potholes in Berkshire Hathaway's investment portfolio and the sharp drop in market value in some of Warren Buffett's largest holdings.
It was not my intention to overly dramatize the short-term miscues nor was it my intention to understate the remarkable long-term investment achievements of Warren Buffett. It was my intention to underscore that the strategy of investing in companies that have apparent moats to protect their business -- and these moats have been so dear to Buffett's investment strategy over multiple decades -- could either:
* have been abandoned by the Oracle of Omaha, owing to his reluctance to alter/sell off his strategic and principal holdings and maintain a tax-efficient portfolio approach; or
* have been influenced by his mistaken analysis of the changing competitive landscape facing some of his portfolio companies (in other words, the moat has been flooded!).
Kass goes on to offer American Express as an example of a Berkshire holding with a putative moat whose product has become commoditized, and he estimates Buffett's long term average annual return on his American Express to be about 2% per year. In his previous column (the same one he links to in the above excerpt), Kass argued that the banks in which Berkshire holds large positions no longer have moats either.