The financial crisis of 2008 has been called “Black Swan” event. Investing strategies that were thought to be solid failed past the test of the crisis. The years of 2008 and 2009 can therefore serve as the best period to test the risks and potential returns of the investing approaches of portfolio managers.
With this in mind, GuruFocus studied the total investment returns of our List of Gurus for the years of 2008 and 2009. For each Guru we used their flagship fund or one of their long term funds as the representative for their performances. We did not cover all the Gurus in this study, because we do not have the performance data for some of them.
The results are shown in the chart below. It is sorted in the order from the best total returns to the worst.
We can see that only five of our Gurus made money in the two years. The best performing Guru of all is Don Yacktman of Yacktman Funds. His fund lost 26% in 2008, but gained 59% in 2009, finished the two-year period with a gain of 17.8%. Hedge fund manager David Einhorn of Greenlight Re (GLRE, Financial) limited his loss to 17.6% in 2008 by shorting financial stocks, he gained 32.1% in 2009, and finished the two years with a net gain of 8.9%. For Warren Buffett, Berkshire Hathaway’s (BRK-A)(BRK-B) book value lost 9.6%, but gained 19.8%, and had a net gain of 8.3% for the two years. Steven Cohen of SAV Capital and Steven Romick’s FPA Crescent Fund also had positive returns.
Among the 51 Gurus studied, 31 of them outperformed S&P500, which lost a little more than 20%. John Hussman’s Hussman Strategic Growth Fund lost only 9% in 2008 because he hedges his portfolio, but he gained only 4.63% also because of his hedge. He finished the two years with a loss of 4.8%.
The managers who lost the most in the two years are the ones who had large losses in 2008, but fail to have large gains in 2009. Ken Heebner’s CGM Focus Fund lost 48% in 2008, but gain only 10.5% in 2009, he still has a loss of more than 40% of the years. Ken Heebner was once the hottest fund manager on the planet, his fund gained 80% in 2007. Murray Stahl’s Horizon Asset Core Value portfolio lost 44% after the two years.
To test the ideas of following Gurus, GuruFocus also created several model portfolios before 2008. These are the performances of these portfolios in the years of 2008 and 2009:
We can see that all model portfolios outperformed the market in 2009, but the Consensus Picks Portfolio and the Guru Bargains Portfolio had larger losses, and after two years, these two portfolios still lost more than 27%, compared with the 20% loss of the S&P500.
The portfolios of Broadest Held and Most Weighted outperformed the market in both of the years, and the two portfolios outperformed the market by more than 15%. The Broadest Held portfolio had a positive return if counting dividends, which outperformed the portfolios of the most of the Gurus.
As a further note, Broadest Held Portfolio consists of the most broadly held 25 stocks in Gurus' holdings. The rank is based on the number of the gurus that hold the stock. Most Weighted Portfolio consists of the 25 most weighted stocks with the most weighted position in the combined holdings of the Gurus.
You can see the current list of the Broadest owned and most Weighted portfolios in the Aggregated Portfolios of Gurus: http://www.gurufocus.com/gurutrac/holding_stat.php.
With this in mind, GuruFocus studied the total investment returns of our List of Gurus for the years of 2008 and 2009. For each Guru we used their flagship fund or one of their long term funds as the representative for their performances. We did not cover all the Gurus in this study, because we do not have the performance data for some of them.
The results are shown in the chart below. It is sorted in the order from the best total returns to the worst.
| Guru Name | Fund | 2008 Return (%) | 2009 Return (%) | 2-Year Total Return (%) |
| Donald Yacktman | The Yacktman Fund | -26.05 | 59.31 | 17.8 |
| David Einhorn | Greenlight Re | -17.6 | 32.1 | 8.9 |
| Warren Buffett | Berkshire Hathaway Book Value | -9.6 | 19.8 | 8.3 |
| Steven Cohen | SAC Capital International Fund | -19 | 28.39 | 4.0 |
| Steven Romick | FPA Crescent Fund | -20.6 | 29.65 | 2.9 |
| Edward Owens | Vanguard Healthcare Fund | -18.45 | 20.96 | -1.4 |
| Bruce Berkowitz | Fairholme Fund | -29.7 | 39.01 | -2.3 |
| Bill Nygren | Oakmark Fund | -32.61 | 44.77 | -2.4 |
| Tweedy Browne | Tweedy Browne Value Fund | -24 | 27.6 | -3.0 |
| Chuck Royce | Premier Fund (RYPRX) | -28.3 | 33.3 | -4.4 |
| Diamond Hill Capital | Small Cap Fund | -25.99 | 28.92 | -4.6 |
| John Hussman | Hussman Strategic Growth Fund | -9.02 | 4.63 | -4.8 |
| Westport Asset Management | Westport Fund | -30.28 | 32.26 | -7.8 |
| Robert Rodriguez | FPA Capital Fund | -34.79 | 40.19 | -8.6 |
| Richard Perry | Perry Capital | -27 | 25.2 | -8.6 |
| Oak Value | Oak Value Fund | -31.71 | 33.41 | -8.9 |
| PRIMECAP Management | Vanguard Primcap Fund | -32.41 | 34.45 | -9.1 |
| Manning & Napier Advisors | Equity Series (EXEYX) | -36.32 | 39.58 | -11.1 |
| Bill Frels | Mairs & Power Growth Fund | -28.51 | 22.52 | -12.4 |
| Jean-Marie Eveillard | First Eagle Fund of America | -30.74 | 26.13 | -12.6 |
| Wallace Weitz | Weitz Partners Fund | -32 | 27.6 | -13.2 |
| Daniel Loeb | Master Fund | -38 | 38.5 | -14.1 |
| Arnold Schneider | Schneider Small Cap Value Fund | -45 | 54.04 | -15.3 |
| John Rogers | Ariel Fund | -48.25 | 63.42 | -15.4 |
| Ruane Cunniff | Sequoia Fund | -27.03 | 15.38 | -15.8 |
| Arnold Van Den Berg | CM Value I Composite | -33.54 | 24.15 | -17.5 |
| David Winters | Wintergreen Fund | -39.05 | 32.78 | -19.1 |
| Brian Rogers | T. Rowe Price Equity Income Fu | -35.75 | 25.62 | -19.3 |
| Mark Hillman | Focused Advantage Equity Compo | -43.75 | 42.45 | -19.9 |
| Jeremy Grantham | GMO US Intrin.Val. III (GMVUX) | -33.8 | 20.5 | -20.2 |
| S&P500 | S&P500 Index | -37 | 26.45 | -20.3 |
| Richard Aster Jr | Meridian Value Fund | -34.73 | 21.4 | -20.8 |
| Martin Whitman | Third Avenue Value Fund | -45.6 | 44.5 | -21.4 |
| Chuck Akre | Akre Capital Private Asset Man | -42.92 | 37.54 | -21.5 |
| Ronald Muhlenkamp | Muhlenkamp Fund | -40.39 | 31.49 | -21.6 |
| NWQ Managers | Nuveen Multi-Manager Large-Cap | -36.16 | 22.39 | -21.9 |
| David Williams | Columbia Value and Restructuring Fund | -47.4 | 46.9 | -22.7 |
| Robert Olstein | Olstein All Cap Value Fund | -43.8 | 37.01 | -23.0 |
| Sarah Ketterer | International Value Fund | -41.95 | 32.01 | -23.4 |
| John Buckingham | Al Frank Fund | -43.6 | 35.02 | -23.8 |
| Mason Hawkins | Longleaf Partners Fund | -50.6 | 53.6 | -24.1 |
| Chris Davis | Davis Financial Fund | -45.62 | 39.11 | -24.4 |
| Dodge & Cox | Dodge & Cox Stock FUND | -43.41 | 31.27 | -25.7 |
| David Dreman | Large Cap Fund - Institutional | -45.06 | 33.24 | -26.8 |
| John Keeley | Small Cap Value Fund | -40.18 | 21.67 | -27.2 |
| HOTCHKIS & WILEY | Large Cap Value Fund | -47 | 34.32 | -28.8 |
| Ron Baron | Baron Partners Fund | -46.67 | 28.2 | -31.6 |
| Charles Brandes | U. S. Value Equity | -55.44 | 34.98 | -39.9 |
| Ken Heebner | CGM Focus Fund | -48.2 | 10.5 | -42.8 |
| Murray Stahl | Horizon Asset - Core Value | -56.5 | 28.5 | -44.1 |
We can see that only five of our Gurus made money in the two years. The best performing Guru of all is Don Yacktman of Yacktman Funds. His fund lost 26% in 2008, but gained 59% in 2009, finished the two-year period with a gain of 17.8%. Hedge fund manager David Einhorn of Greenlight Re (GLRE, Financial) limited his loss to 17.6% in 2008 by shorting financial stocks, he gained 32.1% in 2009, and finished the two years with a net gain of 8.9%. For Warren Buffett, Berkshire Hathaway’s (BRK-A)(BRK-B) book value lost 9.6%, but gained 19.8%, and had a net gain of 8.3% for the two years. Steven Cohen of SAV Capital and Steven Romick’s FPA Crescent Fund also had positive returns.
Among the 51 Gurus studied, 31 of them outperformed S&P500, which lost a little more than 20%. John Hussman’s Hussman Strategic Growth Fund lost only 9% in 2008 because he hedges his portfolio, but he gained only 4.63% also because of his hedge. He finished the two years with a loss of 4.8%.
The managers who lost the most in the two years are the ones who had large losses in 2008, but fail to have large gains in 2009. Ken Heebner’s CGM Focus Fund lost 48% in 2008, but gain only 10.5% in 2009, he still has a loss of more than 40% of the years. Ken Heebner was once the hottest fund manager on the planet, his fund gained 80% in 2007. Murray Stahl’s Horizon Asset Core Value portfolio lost 44% after the two years.
GuruFocus Model Portfolios
To test the ideas of following Gurus, GuruFocus also created several model portfolios before 2008. These are the performances of these portfolios in the years of 2008 and 2009:
| 2008 Return (%) | 2009 Return (%) | Total Return (%) | |
| Broadest Held | -29.0 | 40.3 | -0.3 |
| Most Weighted Portfolio | -33.3 | 39.9 | -6.7 |
| S&P500 Index | -37 | 26.45 | -20.3 |
| Consensus Picks | -45.6 | 33.1 | -27.6 |
| Guru Bargains | -46.6 | 34.6 | -28.2 |
We can see that all model portfolios outperformed the market in 2009, but the Consensus Picks Portfolio and the Guru Bargains Portfolio had larger losses, and after two years, these two portfolios still lost more than 27%, compared with the 20% loss of the S&P500.
The portfolios of Broadest Held and Most Weighted outperformed the market in both of the years, and the two portfolios outperformed the market by more than 15%. The Broadest Held portfolio had a positive return if counting dividends, which outperformed the portfolios of the most of the Gurus.
As a further note, Broadest Held Portfolio consists of the most broadly held 25 stocks in Gurus' holdings. The rank is based on the number of the gurus that hold the stock. Most Weighted Portfolio consists of the 25 most weighted stocks with the most weighted position in the combined holdings of the Gurus.
You can see the current list of the Broadest owned and most Weighted portfolios in the Aggregated Portfolios of Gurus: http://www.gurufocus.com/gurutrac/holding_stat.php.
