Is It Right to Bash Buffett?

This column was originally published on RealMoney on Dec. 13 at 1 p.m. EST. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

Earlier this month, Morningstar published an article that didn't quite bash Warren Buffett's investment strategy, but the title gives an idea of its tenor: "Tough Times for Buffettology." The article focuses not on Buffett himself but on his strategy as used by various mutual funds, and how poorly these funds have done during the past three years.

This article made me wonder if people are truly questioning Buffett's grasp of the current market and how well his strategy might do from now going forward. I'm not going to speak for fund managers who say they emulate Buffett's strategy. But I have followed Buffett for years, and as readers of this column know well, I use a strategy to pick stocks that is based on a book by Buffett's former daughter-in-law, Mary Buffett, called Buffettology.

While others say they follow Buffett, I sometimes wonder. The Morningstar article, which was published Dec. 6, 2006, looked at five funds that say they use Buffett's approach: (WVALX - Cramer's Take - Stockpickr)Weitz Value, Torray, Oak Value, Legg Mason Growth and (CAAPX - Cramer's Take - Stockpickr)Ariel Appreciation.

It reports that while each finished in the top quartile of their respective categories in the 10-year period ending Oct. 31, 2006, each was in the bottom 15% of its category over the trailing three-year period, which roughly parallels the three years we've been following our Buffett strategy.

I believe the strategy I use does an excellent job emulating Buffett's strategy, and there is no reason why following Buffett the past three years should have been a downer. Since we started using the Buffett strategy on Dec. 5, 2003, it has returned 55.8% vs. 33.1% for the S&P 500. Annualized, that's 15.9% for our Buffett portfolio vs. 10.0% for the S&P 500.

Buffett himself, as measured by the performance of his investment vehicle, Berkshire Hathaway (BRKA - Cramer's Take - Stockpickr), has returned 49.3% since mid-2003, a bit less than our Buffett strategy's performance of 55.8%, but pretty damn close.