Finance
Buffett really was not a great stock picker: Swedroe on investing
Larry Swedroe, who is considered one of the market’s most esteemed researchers, thinks Warren Buffett’s investment style doesn’t work well anymore.
He cites the number of professional Wall Street firms and hedge funds now participating in the market.
“Warren Buffett was generally considered the greatest stock picker of all time. And, what we have learned in the academic research is Warren Buffett really was not a great stock picker at all,” Swedroe told CNBC’s “ETF Edge” this week. “What Warren Buffett’s ‘secret sauce’ was, he figured out 50, 60 years before all the academics what these factors were that allowed you to earn excess returns.”
Swedroe indicated index funds can help investors trying to mimic Buffett’s performance.
“[Investor] Cliff Asness and the team at AQR did some great research and showed that what you accounted for the leverage Buffett applied through his reinsurance company. If you bought an index of stocks that had these same characteristics, you would have matched Buffett’s returns virtually,” said Swedroe. “Now today, every investor can own through ETFs or mutual funds the same types of stocks that Buffett has bought through companies that apply this academic research — companies like Dimensional, AQR, Bridgeway, BlackRock, Alpha Architect and a few others.”
Swedroe is the author and co-author of almost 20 books — including “Enrich Your Future – The Keys to Successful Investing” released in February.
In an email to CNBC, he called it “a collection of stories and analogies … that help investors understand how markets really work, how prices are set, why it is so hard to persistently outperform through active management [stock picking and market timing,] and how human nature leads us to make investment mistakes [and how to avoid them].”
During his “ETF Edge” interview,’ Swedroe added investors can also benefit from momentum trading. He contends market timing and stock picking often don’t factor into long-term success.
“Momentum certainly is a factor that has worked over the long term, although it does go through some long periods like everything else will underperform. But momentum does work,” said Swedroe, who’s also the head of economic and financial research at Buckingham Wealth Partners. “It’s purely systematic. Computers can run it, you don’t need to pay big fees and you can access it with cheap momentum.”
In his latest book, Swedroe likens the stock market to sports betting and active managers to bookies. He suggests more investors “play” —or invest — the more likely they are to underperform.
“Wall Street needs you to trade a lot so they can make a lot of money on bid offer spreads. Active managers make more money by getting you to believe that they’re likely to outperform,” said Swedroe. “It’s virtually impossible mathematically for that to happen because they just have higher expenses including higher taxes. They just need you to play, and so, you know, that’s why they tell you active management’s a winner’s game.”
‘Dumb retail money’
He sees active management getting more efficient in pulling in emotional investors – which he calls “dumb retail money.”
“[Emotional investors] do so poorly [that] they underperform the very funds they invest in because they get stock picking wrong and market timing wrong,” Swedroe said.
Finance
Treasury Secretary Bessent says market woes are more about tech stock sell-off than Trump’s tariffs
Treasury Secretary Scott Bessent speaks to reporters outside the West Wing after doing a television interview on the North Lawn of the White House on March 13, 2025 in Washington, DC.
Andrew Harnik | Getty Images
Treasury Secretary Scott Bessent said Wednesday the sell-off in the stock market is due more to a sharp pullback in the biggest technology stocks instead of the protectionist policies coming from the Trump administration.
“I’m trying to be Secretary of Treasury, not a market commentator. What I would point out is that especially the Nasdaq peaked on DeepSeek day so that’s a Mag 7 problem, not a MAGA problem,” Bessent said on Bloomberg TV Wednesday evening.
Bessent was referring to Chinese AI startup DeepSeek, whose new language models sparked a rout in U.S. technology stocks in late January. The emergence of DeepSeek’s highly competitive and potentially much cheaper models stoked doubts about the billions that the big U.S. tech companies are spending on AI.
The so-called Magnificent 7 stocks — Apple, Amazon, Tesla, Alphabet, Microsoft, Meta and Nvidia — started selling off drastically, pulling the tech-heavy Nasdaq Composite into correction territory. The tech-heavy benchmark is down about 13% from its record high reached on December 16.
However, the secretary downplayed the impact from President Donald Trump’s steep tariffs, which caught many investors off guard and fueled fears of a re-acceleration in inflation, slower economic growth and even a recession. Many investors have blamed the tariff rollout for driving the S&P 500 briefly into correction territory from its record reached in late February. Wall Street defines a correction as a drop of 10% from a recent high.
S&P 500, YTD
Trump signed an aggressive “reciprocal tariff” policy at the White House Wednesday evening, slapping duties of at least 10% and even higher for some countries. The actions sparked a huge sell-off in the stock market overnight, with the S&P 500 futures declining nearly 4% and the blue-chip Dow Jones Industrial Average shedding 1,100 points. The losses will likely but the S&P 500 back into correction territory in Thursday’s session.
“It’s going to be fine if we put the best economic conditions in place,” Bessent said in a separate interview on Fox Wednesday evening. “If you go back and look, the stock market actually peaked on the [DeepSeek] Chinese AI announcement. So a lot of what we have seen has been just an idiosyncratic tech sell-off.”
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