While a new analysis seems to indicate that Warren Buffett has lost his touch in recent years, Validea CEO John Reese says that a deeper examination indicates otherwise.

“While Mr. Buffett’s Berkshire Hathaway Inc. has underperformed the broader market over the past five years, the results are largely circumstantial,” Reese writes for Canada’s Globe and Mail. “I also think his investment approach still works in today’s environment — and I have the proof.”

Reese says that Berkshire’s underperformance, the subject of a recent study by statistician Salil Mehta, shouldn’t be that surprising given that Buffett’s penchant for investing in high-quality, steady stocks — and for holding a decent amount of cash — should be a drag on returns during the more speculative environments typical of early bull markets. Another big factor that makes it difficult for Berkshire to produce the giant returns it used to: Berkshire’s size. Because the firm has become so large, it can really only benefit from very large stocks, so it’s unable to take advantage of opportunities in the small cap universe, Reese says.

But Reese says his Buffett-inspired Guru Strategy — which is able to benefit from small caps — has produced very strong returns recently, returning 148 per cent since the start of 2009, compared with 103 per cent for the S&P 500 (through April 10). That, he says, is a sign that Berkshire’s underperformance is less about problems with Buffett’s approach and more with the logistical hurdles facing such a large company. To read more about the model and some of the stocks it likes, click here.