{"id":138979,"date":"2010-01-04T12:30:00","date_gmt":"2010-01-04T17:30:00","guid":{"rendered":"tag:blogger.com,1999:blog-3087194156628161158.post-5023223367476844455"},"modified":"2010-01-05T03:37:28","modified_gmt":"2010-01-05T08:37:28","slug":"businessweek-buffett-posts-worst-stock-performance-against-sp-500-in-decade","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/138979","title":{"rendered":"BUSINESSWEEK: Buffett Posts Worst Stock Performance Against S&P 500 in Decade"},"content":{"rendered":"

January 04, 2010, 12:16 AM EST<\/span><\/p>\n

By Andrew Frye<\/p>\n

Jan. 4 (Bloomberg) — Warren Buffett recorded his worst performance against the stock market in a decade last year after committing $26 billion to a railroad takeover and lowering his expectations for investment returns.<\/p>\n

Berkshire Hathaway Inc., the company Buffett has led as chairman for more than four decades, advanced 2.7 percent on the New York Stock Exchange in 2009, less than the 23 percent return in the Standard & Poor\u2019s 500 Index. It was Berkshire\u2019s worst showing since falling 20 percent in 1999, compared with a 20 percent gain in the index. Berkshire beat the index in 15 of the last 22 years.<\/p>\n

Buffett, whose acquisitions and stock picks propelled Omaha, Nebraska-based Berkshire\u2019s 30-fold increase in 20 years, is finding it harder to duplicate those returns as his company expands. The purchase of Burlington Northern Santa Fe Corp., announced in November, wasn\u2019t \u201ccheap,\u201d Buffett said. The deal adds another business, along with luxury flights and manufactured housing, that suffers when the economy falters.<\/p>\n

\u201cThis isn\u2019t your father\u2019s Berkshire,\u201d said Jeff Matthews, the author of \u201cPilgrimage to Warren Buffett\u2019s Omaha\u201d and founder of the hedge fund Ram Partners LP. \u201cIt\u2019s a protector of wealth and hopefully steady growth, but very dependent on the economy in ways that it hasn\u2019t been in the past.\u201d<\/p>\n

Buffett, 79, won global renown as the \u201cOracle of Omaha\u201d for stock picks, including Capital Cities\/ABC Inc. in the 1980s and PetroChina Inc. in 2003, that produced multibillion-dollar gains. Berkshire doesn\u2019t pay dividends or buy back stock, and Buffett\u2019s main occupation as the company\u2019s chief executive officer is deciding where to invest earnings from a portfolio of operating companies and securities.<\/p>\n

<\/p>\n

Railroad Investment<\/p>\n

<\/p>\n

The Burlington Northern deal, which Buffett calls an \u201call- in wager\u201d on the U.S. economy, brings Berkshire 37,000 workers and a share of a regulated industry. Berkshire expects to own the railroad for the next century and get \u201ca decent return,\u201d Buffett said in a November interview with Charlie Rose on PBS.<\/p>\n

\u201cReasonable return is good enough,\u201d Buffett said in the interview. \u201cYou know, 50 years ago I was looking for spectacular returns, but I can\u2019t get \u2018em.\u201d<\/p>\n

Berkshire\u2019s performance against the S&P 500 has slipped even according to Buffett\u2019s favorite metric, book value per share. The measure of assets minus liabilities, which Buffett says most closely indicates a firm\u2019s value, trailed the index three times in the 10 years through 2008 after lagging just three times in the previous 34. In the first nine months of 2009, Berkshire\u2019s book value-per share gain trailed the S&P 500 again, 15 percent to 17 percent.<\/p>\n

<\/p>\n

Outlook for Profit<\/p>\n

<\/p>\n

Berkshire\u2019s annual profits may return to growth this year, according to an estimate by Meyer Shields, an analyst at Stifel Nicolaus & Co. Profit, which fell by more than half in 2008, may rise 51 percent to $7.55 billion, according to Shields. Berkshire reported record profit of $13.2 billion in 2007.<\/p>\n

Buffett, the second-richest American, positioned Berkshire to weather the contraction in the U.S. economy by stockpiling $44 billion in cash. Starting in 2008, when corporate borrowing costs surged, he drew on that hoard to finance Goldman Sachs Group Inc., General Electric Co., Swiss Reinsurance Co. and the Mars Inc. takeover of chewing-gum maker Wm. Wrigley Jr. Co.<\/p>\n

Those transactions are paying coupons that helped boost investment income in the first nine months of the year. Still, losses at Berkshire\u2019s NetJets subsidiary and earnings declines at Clayton Homes contributed to a pretax profit plunge of more than half to $1.57 billion at Berkshire\u2019s manufacturing, service and retailing businesses.<\/p>\n

\u201cMany of Berkshire\u2019s businesses were perhaps hit worse\u201d than companies in the S&P 500, said Guy Spier, a principal at hedge fund Aquamarine Funds LLC, which owns Berkshire shares. \u201cThey have a huge exposure to the housing market; NetJets has been impacted.\u201d<\/p>\n

–Editors: Dan Reichl, Dan Kraut<\/p>\n

Share Investor Links<\/span><\/a><\/a><\/p>\n

Share Investor Blog<\/a> – Stockmarket & Business commentary
Share Investor New Zealand Business News<\/a>– Get more business news
Discuss this topic @ Share Investor Forum<\/a> – Register<\/strong><\/strong><\/a> free
Share Investor’s Daily Forex Updates<\/a><\/p>\n

Recommended Amazon Reading<\/span><\/p>\n\n\n\n\n
\"Warren<\/a><\/td>\nWarren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage<\/a> by Mary Buffett<\/span>
Buy new: $16.47 \/ Used from: $15.70
Usually ships in 24 hours<\/span><\/td>\n<\/tr>\n
\"The<\/a><\/td>\nThe Essays of Warren Buffett: Lessons for Corporate America, Second Edition<\/a> by Warren E. Buffett<\/span>
Buy new: $26.10 \/ Used from: $33.05
Usually ships in 24 hours<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n


<\/span>From Amazon – <\/a>Apple iPod touch 32 GB (3rd Generation) NEWEST MODEL<\/a>\"\"<\/span><\/p>\n