Warren Buffett's bets missed the broader record bull market in 2019 by a long shot.
Berkshire Hathaway, the company led by the famed value investor, ended 2019 in the green but still fell short of an important measure of success for the company's shares.
In 2019, shares of Berkshire Hathaway ended the year up 11%, while the S&P 500 gained 29%. It was the worst underperformance for Berkshire Hathaway since 2009.
It was also the third year in a row in which Buffett did not close a major acquisition. It's one of the reasons that Berkshire Hathaway's cash pile ballooned to a record $128 billion, the company reported in its third-quarter earnings release in November.
The amount of cash on hand has confused analysts on Wall Street, who aren't sure why Buffett isn't deploying it in a major acquisition or at least in more share buybacks.
"We don't have a clear sense of Berkshire's acquisition or capital allocation strategy," the CFRA analyst Catherine Seifert wrote in a November 2019 note. "That, coupled with some mixed operating results, removes a catalyst from the shares," she said.
In his 2018 letter to shareholders, Buffett wrote that it's become much harder to find large companies to purchase. "In the years ahead, we hope to move much of our excess liquidity into businesses that Berkshire will permanently own," Buffett wrote.
He continued, "The immediate prospects for that, however, are not good: Prices are sky-high for businesses possessing decent long-term prospects."
Buffett's most recent major acquisition — the $32 billion purchase of Precision Castparts — was finalized in January 2016. In 2019, he attempted to purchase Tech Data, a technology distributor, but refused to engage in a bidding war when Apollo Management made a competing offer.
This long-held tradition of avoiding bidding wars may have also kept Buffett from making Tiffany & Co., the luxury jeweler, an offer at the end of the year. The company reached out to Buffett, he confirmed to the Financial Times, after the luxury conglomerate LVMH made it an offer. Buffett refused to counter, and LVMH struck a $16.2 billion deal for Tiffany & Co. in November.
But acquisitions aside, some investors are frustrated that Buffett hasn't yet spent the amount he's permitted to on share buybacks.
In the third quarter, for example, Buffett repurchased $700 million of Berkshire Hathaway stock. He could have repurchased as much as $200 million more, according to UBS.
"We had originally forecasted $900m in share repurchases for the quarter. Given the discount to intrinsic value BRK's shares are currently trading at and its substantial excess cash balance, we remain surprised that the company has not been more aggressive with share repurchase," a team of UBS analysts led by Brian Meredith wrote in a November note.
Investors are still scratching their heads, and they most likely will be until they get more answers when Berkshire Hathaway releases its fourth-quarter 2019 earnings and annual shareholder letter in February.