Warren Buffett doesn't owe shareholders an apology for falling short of a performance goal at his Berkshire Hathaway Inc. (BRK/A), Vice Chairman Charles Munger said at the company's annual meeting.
Mr. Munger said Mr. Buffett set a high bar with a target of boosting Berkshire's net worth more than the advance of the Standard & Poor's 500 Index over a five-year period. Berkshire fell short in the stretch that ended Dec. 31, and Mr. Buffett said in a March report to shareholders that performance should instead be measured over the course of stock-market cycles.
“Warren has set a ridiculously tough standard,” Mr. Munger said Saturday in Omaha, Neb. “If this is failure, I want more of it.”
Book value, the measure of assets minus liabilities that Mr. Buffett highlights, rose to $134,973 a share at the end of December, 91% more than where it stood five years earlier. The S&P 500 (SPX) returned about 128% during that period, including dividends, as stocks rallied from their financial-crisis lows. The Berkshire number is an after-tax figure, whereas the index results are before taxes.
Book value at Berkshire rose 2.6% in the first quarter to $138,426 a share. The S&P 500 posted a total return of 1.8% in the period.
While Mr. Buffett said Saturday that he didn't change the yardstick by which he measures Berkshire's performance, the shift away from a five-year target raises questions about transparency, Meyer Shields, an analyst at Keefe, Bruyette & Woods Inc., said in a note to clients.
“In the years leading up to 2013, Mr. Buffett's letter focused only on five-year relative performance,” Mr. Shields wrote. “The words 'stock market cycle' didn't appear even once.”