By Gary Aiken | December 11, 2025
As 2025 draws to a close, I’m dedicating this month’s insight to reflecting on Warren Buffett’s final year at the helm of Berkshire Hathaway, ending a stunning track record of superior returns that may never be matched. From 1965 to 2024, Berkshire compounded returns at 19.9% per year, while the S&P 500 returned 10.4%. He beat the market in 40 of those 60 years. There are many keys to that performance record, but the most important takeaway is to understand that it is not necessary to win every year to still succeed in the long run.
As baseball writer Grantland Rice once wrote, it’s not whether you win or lose in any particular year, but how you play the game. Years ago, I conducted a study of mutual funds that achieved superior results over long periods of time. It turned out that there were a few common ingredients amongst managers who were consistently able to outperform the markets. Among these were a couple that stick with me to this day.
First, there was a team. The team had a leader – a guru. Someone whose investment philosophy guided the process of security selection. This guru had brilliant ideas, but the most brilliant idea was one that most business owners know from experience – hire people around you who are smarter than you are. The guru is responsible for performance and decision making, but he or she enables analysts to keep asking questions, do their own independent work, and be bold in bringing new ideas forth.
I look for this quality in the management of companies I consider putting in client portfolios, too. In his book The Outsiders, author William Thorndike finds that great companies often have a CEO who controls philosophy, culture, and capital allocation. That CEO also delegates authority to expert operating officers who are empowered with independence to carry out their missions. It should be no surprise that this book is at the top of Warren Buffett’s recommended reading list. If you haven’t read it, it’s a quick read and maybe a good stocking stuffer for the non-fiction enthusiast on your list.
Second, the portfolios of top performing funds were typically concentrated. There were often fewer than 25 securities at any given time in the portfolio. Warren Buffett and other great investors beat the market by taking idiosyncratic (single stock) risk more frequently. Diversification often helps yield average performance. There’s nothing wrong with average performance. We use that 10.4% track record of the S&P 500 over the previous 60 years as a benchmark in financial planning. 2025 has been an above average year so far with the S&P 500 up approximately 17%, including dividends. If you are able to earn the average, or even a little less than the average returns of an index like the S&P 500, you will likely be able to accommodate the goals outlined in your financial plan. But if you seek above average returns, then you must take on more risk – and that risk often comes in the form of concentration.
In our portfolios at Concord, we certainly overweight and underweight individual securities and sectors, but our investment policies prevent over-concentration. This is because we are mindful of idiosyncratic risks. One particular investment shouldn’t have the ability to single-handedly erase our returns for the year. One particular industry sector or investment factor shouldn’t make or break our overall strategy. Our process seeks to earn alpha little by little, hopefully taking two steps forward for every one step backwards. That said, our Direct Investing strategies own approximately 10% of the market index stocks at any given time. Industry sector and security selection matter a great deal. We’re not always going to be right, so it’s important to ensure that what we get wrong doesn’t adversely impact our clients.
Finally, the portfolios of these successful mutual funds were often either value or growth-at-a-reasonable price in orientation. I’m less certain of this third postulate than the previous two, as it seems easily biased. The study I conducted only examined mutual funds. Certainly, there could be family offices, insurance companies, banks, or hedge funds that had superior returns or participated in markets that weren’t, by law (the 1940 Investment Company Act, etc.), easily consumed in mutual fund form. The general direction of markets over the course of my study (1980 to 2010) had been bumpy and benefited certain kinds of stocks more than others. There are many ways to make money in financial markets, and the study only looked at the most easily accessible way – investing in public equities.
That said, I think the notion of “value” must be fluid for any investor. As we look back at the career of Warren Buffett, we note how he went from a classical value investor (finding used cigars with one last puff) to the power of an insurance company balance sheet, to investing in durable brands and companies with sustainable growth, to ultimately doing deals no one else could do.
This year we found relative value in semiconductors and equipment, international stocks, and big banks. We thought there would be more volatility in markets, but ultimately stocks would grind higher. The wall of worry has changed over the course of the year: Price-to-Earnings ratios, Deep Seek, tariffs, Department of Government Efficiency (DOGE), tax and spending policy, immigration, wars in the Middle East and Eastern Europe, Chinese retaliation and provocation, government shutdowns, Fed independence, and so on. Now, the nightly news wants to add Venezuela to that list of concerns.
There’s always a reason to be pessimistic. I wrote in early November that I wouldn’t be surprised by a 5-10% pull back. By mid-November, the S&P 500 had fallen 5.4%, but ended the month up 0.25%. Warren Buffett had another way of addressing the wall of worry: “The most important quality for an investor is temperament, not intellect.” Philosophy, process, and policies enable investment professionals to systematize temperament. After all, we can’t all be Warren Buffett.
Author
Gary Aiken, Chief Investment Officer
Gary Aiken is the Chief Investment Officer for Concord Asset Management and is responsible for macroeconomic analysis, asset allocation, and security selection, as well as trading and investment operations.
Gary has over 23 years of investment experience and holds an undergraduate degree in economics from the University of Maryland and an MBA from The George Washington University School of Business.
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