Nicholas Vardy

It takes a lot of chutzpah to bet against the greatest investor in history.

But much to my own surprise, that's exactly the position I've found myself taking over the past few weeks.

Here's how it happened...

In late February, I published an article on Marketwatch.com entitled “Has Warren Buffett Lost It?”

In that article, I casually mentioned that I didn’t think Warren Buffett would be willing to bet that Berkshire Hathaway (BRK-B) would outperform a U.S. small-cap index over the next 10 years.

I thought my bet was a no brainer.

After all, Buffett himself had recently recommended that his heirs invest their inheritance in an S&P 500 Index fund after he himself no longer holds the reins at Berkshire. And since U.S. small caps consistently outperform the S&P 500, it seemed like a slam dunk “Buffett-beating bet.”

Much to my surprise, my proposed bet was picked up as far afield asthe Brazilian financial press.

Then I was contacted by longtime Berkshire investor David Rolfe, of Wedgewood Partners, who stepped in to take Buffett’s side of the bet.

Here are the terms of the bet as we set them out.

Rolfe invested $25,000 in Berkshire Hathaway (BRK-B) at the closing price on March 3, 2014, at $116.06.

I invested the same amount in the Vanguard Russell 2000 Index ETF (VTWO) on the same day -- at $93.20.

A decade later -- on March 3, 2024 -- if Berkshire is ahead, I write a check to Rolfe’s designated charity for the amount by which Berkshire outperformed VTWO.

If VTWO ends up ahead, then Rolfe writes my designated charity a check for the amount by which VTWO outperformed Berkshire.

We agreed to look at Morningstar's “total return” numbers -- that is, which investment makes the most money -- and ignore calculations of risk-adjusted returns.

Why I’m Betting against Berkshire…


Nicholas Vardy

Nicholas Vardy is currently editor of the monthly investment newsletter, The Alpha Investor Letter, which provides longer-term global investments. He also writes two weekly trading services, Triple Digit Trader and Bull Market Alert, which focus on making short-term profits in the hottest markets in the world.