By Eric Rosenbaum 12/28/09 – 11:39 AM EST
OMAHA, Neb. (TheStreet) — It was not the finest of years for Warren Buffett — indeed, the top ten Berkshire Hathway(BRK.B Quote) holdings have significantly trailed the best S&P index returns in 2009, according to data as of the last week of December.
Most of the Berkshire top ten finished the year ahead of share prices on Dec. 31, 2008 — with the exception of Wells Fargo(WFC Quote).
Still, gains made by Warren Buffet’s biggest portfolio holdings were relatively small when compared to the best performing stock sectors in 2009. The broad recovery throughout the U.S. economy in the second half of 2009 was reflected to a much-lesser extent in Buffett’s biggest bets.
The best-performing stock sectors in 2009 were led by the S&P 500 Healthcare Facilities Index, which was up more than 380% through Dec. 23. The S&P 500 Automobile Manufacturers Index was up 232% through Dec. 23. The S&P 500 Real Estate Services (219%) and Dividend Metals & Minerals (217%) indexes were also both up more than 200% in 2009.
Buffett has always made it clear there are certain sectors he just won’t play in as he doesn’t understand them — the Internet sector most notable among the Buffett-mystifiers. And in 2009, the stocks Buffett does understand couldn’t touch the Internet. The S&P 500 Internet Retail Index was the fifth-best performing sector in 2009, up 183% through Dec. 23.
Even the best-performing of Berkshire Hathaway’s top ten significantly trailed the returns of the fifth-best sector performance, S&P 500 Internet Retail. American Express(AXP Quote), of which Berkshire Hathaway owns 13%, was up more than 120% in 2009, from $18.55 on Dec. 31, 2008, to $41.70 on Dec. 28, 2009.
Among financial stocks, it was a mixed bag for Berkshire Hathaway in 2009, as the gains made by American Express were offset by the continued slump at Wells Fargo(WFC Quote). Buffett owns close to 7% of Wells Fargo, which declined from $29.48 at the beginning of 2009, to $26.91 on Dec. 28, 2009.
Kraft(symbol Quote), of which Berkshire Hathaway owns 9%, inched out minor gains in 2009, from a Dec. 31, 2008 share price of $26.85, to $27.36 on Monday.
Gains made by Coca-Cola(KO Quote), of which Buffett also owns approximately 9%, were at the level of the broad market. Coca-Cola shares rose from $45.27 at the outset of 2009 to $57.40 on Dec. 28, or a gain of roughly 21%, on par with the S&P 500 Index 2009 returns.
Berkshire Hathaway’s biggest holding, Wesco Financial(WSC Quote), rose from $288 to $343 through Dec. 28. Berkshire owns 80% of Wesco.
Burlington Northern(BNI Quote), increased from $75.70 to $98.40 after Buffett announced the premium he was paying for the railroad shares. Berkshire owned 22% of Burlington Northern ahead of the proposed complete takeover.
The Washington Post(WPO Quote), of which Buffett owns 18%, rose from $390 to $445 by Dec. 28, or a gain of 12%, still well short of the broad market.
Moody’s(MCO Quote), in which Berkshire Hathaway has been decreasing its 13.5% stake, gained from $20.00 to $27.47 by Dec. 28. Still, the 2009 gain of 27% for Moody’s was nowhere near the best S&P sector gains in 2009. What’s more, the fact that Buffett was decreasing his Moody’s stake throughout 2009, while big holdings like Kraft and Coca-Cola trailed the markets, did not help the return profile of Berkshire’s biggest bets.
Paul Howard, an analyst with Janney Montgomery Scott’s Langen McAlenney division, said while the biggest Berkshire Hathaway bets clearly were not aligned with the best-performing stock sectors in 2009 — and, in fact, significantly lagged for the most part — Buffett did make some great investments in 2009 that should perform well over time. Howard pointed to the deals Buffett struck for preferred shares in Goldman Sachs(GS Quote) and General Electric(GE Quote).
Howard noted that the Goldman investment has already proven a “home run” and, especially in a low-yield environment like the current one, both financial sector investments should perform well over time.
— Reported by Eric Rosenbaum in New York.
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