There are few skeptics more anti-bitcoin than Berkshire Hathaway executives Warren Buffettt and Charlie Munger. If you sell the assets with ‘rat poison squared‘ That is, of course, difficult to surpass. But if he had added it to his portfolio anyway, then he was a lot better off in pretty much every way. Here you can read what BTC had done with a Buffett-like portfolio.
Warren Buffett would have been better off with bitcoin
Alpha Zeta, the pseudonym Chief Investment Officer (CIO) of Swan Bitcoin, has put together a hypothetical portfolio showing the usefulness of Bitcoin (BTC). Many investors choose not to put their money in crypto because it would be risky, but in Alpa Zeta’s portfolio the reverse turned out to be true.
The portfolio without BTC consists of four stocks, namely the asset manager BlackRock (ticker: BLK), Warren Buffett’s own Berkshire Hathaway (BRK.A), JP Morgan Chase (JPM) and Microsoft (MSFT). This portfolio has produced about 16% per year for the past four years and eight months. That is a total of 100.77% – not bad.
The historical volatility of this portfolio over this period was 17.54%, resulting in a sharp ratio of 0.78. The sharpe ratio is the ratio between risk and return and enables you to make your portfolio as effective as possible.
The Rat Poison Portfolio 🐀
An equally weighted portfolio of Berkshire Hathaway, Microsoft, JP Morgan and BlackRockGuess what happens when we add #bitcoin to this portfolio?
Higher volatility?
Higher drawdowns?
Higher risk?Let’s run the numbers pic.twitter.com/dIXoSLJlqS
— Alpha Zeta (@alphaazeta) April 20, 2023
If you put 2.5% of this portfolio in bitcoin, your return would not only be 19.55%, the sharpe ratio would also increase to 1.00. If you had put 5% in BTC, this would have been 23.06% and 1.20 respectively. Of course there are no guarantees for the future, and this portfolio may not work in the future.
Portfolio Warren Buffett not quite the same
Of course, the market analyst did not take over the entire portfolio of Buffett’s investment fund, Berkshire Hathaway. So it is not one-to-one applicable to Warren Buffett’s situation, who is known for having almost all of his wealth in his company.
Still, the three remaining stocks in the hypothetical portfolio closely resemble the stocks Berkshire Hathaway owns. At the time of writing, 44% of Berkshire’s portfolio in Apple, which is relatively similar to Microsoft. JP Morgan and BlackRock stocks are also not owned by the fund, but Bank of America, Citigroup and BNY Mellon do. So the exposure is still reasonably close.
Buffett and Munger have been demonstrating their distaste for bitcoin and crypto in general for years. Charlie Munger called the largest crypto a kind of venereal disease last year, and investing in it is completely insane, according to him.
