Episode summary
A Good ETF's Underperformance Is a Feature, Not a Bug
The Meb Faber Show
· · Hosts: Meb Faber
Summary
Meb Faber argues that judging an investment strategy by a short run of weak returns is usually the wrong frame. Using Warren Buffett’s long history at Berkshire Hathaway as the example, he notes that even world-class managers can underperform for long stretches before proving their edge again. He says investors often abandon good ideas too early, especially when recent performance is poor and sentiment turns negative.
He applies that lesson to Cambria Shareholder Yield ETF, SYLD, which has a strong long-term record but was in a rough patch in 2024 and 2025 and, at the time of the episode, had outflows. Faber points to rolling return analysis to show that one-year results can look noisy, while longer five- and 10-year windows better reveal the strategy’s consistency. He says SYLD has outperformed its category in every quarterly observation on the longer horizons since sufficient data became available.
Faber also argues valuation matters for future returns. He says SYLD’s end-2025 valuation metrics were cheaper than both its Morningstar midcap value category and the S&P 500, which he views as supportive of the strategy’s long-term opportunity set. The core message is that underperformance can be a normal cost of admission for a sound process.
Key takeaways
- Meb Faber says even elite strategies like Berkshire Hathaway can underperform for years without being broken.
- Faber says SYLD has a top-decile long-term track record but was bottom 11% in 2025, which creates a discipline test for investors.
- Faber says rolling 5- and 10-year returns are more useful than recent calendar-year results for judging an ETF's durability.
- Faber says SYLD’s 2025 valuation was cheaper than its Morningstar midcap value category and the S&P 500, which he views as a positive long-term setup.
Notable quotes
“short-term underperformance is not necessarily a flaw. In many cases, it can be a feature, a cost of admission for long-term opportunity”
“When investors hear Rip Van Winkle, the duration they consider is an afternoon nap versus a decade or two of slumber”
“As time horizon expands, randomness tends to fade while the signal can strengthen”
“In every scenario, SYLD is the cheapest, then the Morning Star mid midcap value category, and usually the S&P at the end”
How the episode opens
Welcome to the Met Favor Show, where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.
Met Faber is the co-founder and chief investment officer at Cambria Investment Management. For more information, visit cambriavestments.com.
What's up everybody? It's time for another episode. Let's not waste any time and jump right in.
Beyond the usual market volatility and geopolitical noise, 2025 marked a historic milestone, the retirement of Warren Buffett, arguably the greatest investor of all time. Imagine if you had invested in Berkshire Hathaway stock back when Warren took over. $10,000 invested in 1965 would have grown to over $600 million through year end 2025.
Amazing. Our favorite statistic, courtesy of Chris Bloomstrand, another podcast alum, is that Berkshire Hathaway stock could decline by 99% and still outperform the S&P 500 since inception. Now, many of us were not alive back in 1965, and even if we were, we may not have had the confidence in a young Warren.
However, most people understood that Buffett was an amazing investor after 10 or 20 years of stellar returns. Unfortunately, after watching Buffett post two decades of those killer returns, those same spectators may have been fearful that they may have missed the boat. Maybe they were too late.
Many investors wait and wait and wait for that magical pullback in performance that often never occurs. Or maybe when you do get that pullback and the star manager has hit that rough patch, investors often hit the pause button on their buy orders or worse, run for the exits instead of backing up the truck to invest. Think back 25 years ago to the turn of the millennia, 1999.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- etf underperformance
- strategy evaluation
- cambria syld
- fund risk
- investing in rough patches
Watch the episode
Watch “A Good ETF's Underperformance Is a Feature, Not a Bug” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Meb Faber Show, this episode and its artwork belong to The Idea Farm. Octagon is not affiliated with the show; this page is an independent summary.
