Warren Buffett's 'chronic underperformance' is frustrating investors and analysts

• Warren Buffett is under fire for trailing the broader market and failing to strike deals and pile into stocks during the coronavirus sell-off.
• The Berkshire Hathaway CEO's cautious approach could mean he was left out of the market recovery too.
• "I am nervous that he may have missed this whole rally," Edward Jones analyst James Shanahan told the Financial Times.
• However, some of Buffett's investors are still backing his company to deliver.
• "Berkshire Hathaway remains designed to reward investors over time but not on time," Thomas Russo, a managing member of Gardner Russo & Gardner, told the Financial Times.
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Warren Buffett may be feeling the heat as investors and analysts line up to criticize his Berkshire Hathaway conglomerate for lagging the broader market, failing to capitalize on the coronavirus sell-off, and potentially missing the record rally that followed it.

The famed investor's company is guilty of "chronic underperformance," Cathy Seifert, an analyst at CFRA Research, told the Financial Times.

A key reason is Buffett and his right-hand man Charlie Munger's bias towards banks and insurers, which has meant they've mostly missed out on the surge in technology stocks. As a result, Berkshire stock rose 11% last year, trailing the S&P 500's 29% gain.

"Both Warren and Charlie have acknowledged that they have missed Amazon and that they should be looking at these companies but they have also said they don't understand them," Christopher Rossbach, investment chief of J. Stern & Co., told the Financial Times.

"They have kept them in the box that Warren has on his desk that says 'too hard,'" Rossbach added. "What will it take for them to take these stocks out of the box?"

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Moreover, some of the wagers that Buffett has made have disappointed. Soured bets on Kraft Heinz and Occidental Petroleum "have really tarnished Berkshire's reputation for dealmaking," Seifert told the Financial Times, adding that the Occidental deal has been an "unmitigated disaster."

Buffett's record has taken a bruising in recent weeks. For example, he invested in the "big four" US airlines in 2016 after swearing off the sector, only to sell them at a loss this April.

The investor was also widely expected to take advantage of the market meltdown by buying shares, repurchasing stock, striking lucrative bailout deals, and pulling the trigger on an "elephant-sized acquisition" after a four-year drought.

Instead, Berkshire grew its cash pile to $137 billion in the first quarter, and sold more stock than it bought in April. Buffett's cautious approach could mean he's been left out of the recent market rebound too.

"I am nervous that he may have missed this whole rally," James Shanahan, an analyst at Edward Jones, told the Financial Times. "That's frustrating."

"A lot of retail investors were plowing money into the market and doing better than professional investors," he continued. "I think you can include Buffett in that."

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Buffett explained his relative inactivity at Berkshire's annual meeting in May. He pointed to the deep uncertainty around the scale, duration, and ultimate costs of the pandemic as one reason.

The investor also blamed a lack of attractive opportunities on the Federal Reserve's unprecedented intervention, which has shored up valuations and provided businesses with a cheaper source of financing than Berkshire.

Berkshire has also been crowded out by private equity firms that are flush with cash and willing to offer better terms to troubled businesses.

Goldman Sachs, Harley-Davidson, and other companies had far fewer options when they turned to Buffett for help during the financial crisis.

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However, some investors are still backing Buffett's company to deliver in the long run.

"Berkshire Hathaway remains designed to reward investors over time but not on time," Thomas Russo, a managing member of Gardner Russo & Gardner, told the Financial Times.

Buffett shouldn't hustle to spend Berkshire's $137 billion, he added. "If you rush it, he could make a mistake."