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Warren Buffett Meets His Match

Written By Brian Hicks

Posted January 6, 2009




When it comes to the Warren Buffett story, there’s really not much that I don’t love about it .  

After all, how could you not like a guy whose favorite meal is a big cheeseburger and a Cherry Coke?   On top of that, he still lives in the house that he bought in 1958 for $31,500—-long before he ever became one of the richest guys in the whole world.  

And as for his financial talent….well everybody knows the story on that one.  

But as good as Warren Buffett has been in the past, he met his match in 2008. He lost his shirt like everyone else.  

Here’s the story on Buffett’s 2008 foibles.  

From Bloomberg by Hugh Son entitled: Buffett has ‘Nowhere to Hide’ Amid Berkshire’s Plunge  

“Billionaire Warren Buffett’s Berkshire Hathaway Inc. slumped 32 percent last year, the worst performance in more than three decades, as the U.S. recession forced down the value of the firm’s equity holdings and derivative bets.  

Most of the stock decline happened in the last three months as Berkshire posted a fourth straight profit drop amid sagging insurance results. The company still beat the 38 percent tumble of the Standard & Poor’s 500 Index, the 14th year in 20 that Buffett outperformed the benchmark. Just six of 1,591 U.S. stock mutual funds with at least $250 million in assets made money for investors last year, according to data compiled by Bloomberg.    

“In 2008, there was nowhere to hide,” said Guy Spier, chief investment officer at Aquamarine Capital Management, which holds shares in the Omaha, Nebraska-based company. “Berkshire can’t escape the general fate of American businesses. What Buffett tries to do is ensure that Berkshire Hathaway does less badly than other companies.”  

Buffett, 78, poured money into stocks as prices fell and increased Berkshire’s pace of deals as the contraction in credit markets hobbled buyout firms. Buffett spent about $3.9 billion on equities in the third quarter, making Berkshire the biggest shareholder in ConocoPhillips, the second-largest U.S. refiner. Berkshire announced 12 acquisitions in 2008, compared with eight in 2007, and also agreed to buy $8 billion in preferred shares from Goldman Sachs Group Inc. and General Electric Co.  

“Buffett has the opportunity to do what he does best, which is acquire new companies at prices that have him licking his lips,” said Frank Betz, a partner at Warren, New Jersey-based Carret Zane Capital Management, which holds Berkshire shares. “I don’t think Mr. Buffett is bummed out at all.”   Most of the top holdings in Berkshire’s stock portfolio, valued at $76 billion as of Sept. 30, declined at least 15 percent in the past three months of 2008. ConocoPhillips plunged 29 percent in the fourth quarter. Coca-Cola Co., Berkshire’s top holding, dropped 14 percent, and No. 2 Wells Fargo & Co. plummeted 21 percent.”  

Of course, how long Mr. Buffett stays down is another matter entirely. After all they don’t’ exactly hand out the title of “the world’s greatest investor” to just anyone.  

Here’s a bet that Warren will have the last laugh on this one.  

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