Question

Buffet describes the gain of his Berkshire Hathaway’s share price as follows: “We are certain that the rate of per-share progress will diminish in the future – a greatly enlarged capital base will see to that.  But we will be disappointed if our rate does not exceed that of the average large American corporation.”  Indeed, Berkshire Hathaway has not outperformed the market as strongly in recent years according to the case data.  What can explain this trend?

A. As an investment company increases in scale, it cannot grow faster than the market because it owns the market, and its returns diminish.

B. Both

C. Supply of high performing assets in the market is limited.

D. Neither

Answer 1

Both the statements are correct as the company basically owns the market and opportunities are limited