New York: The shares of billionaire Warren Buffett’s Berkshire Hathaway Inc. dropped 32% in 2008, the worst performance in at least three decades, as the recession forced down the value of the firm’s equity holdings and derivative bets. Most of the decline was in the last three months as Berkshire posted a fourth straight profit drop amid sagging insurance results.
“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. “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. He 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 US refiner. Berkshire announced 12 acquisitions in 2008, compared with eight in 2007, and 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 acquiring 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.”
Jackie Wilson, a spokesman for Berkshire, didn’t return a call seeking comment.
Most of the top holdings in Berkshire’s stock portfolio, valued at $76 billion as of 30 September, have declined at least 15% in the past three months. ConocoPhillips plunged 29% in the fourth quarter. Coca-Cola Co., Berkshire’s top holding, dropped 14%, and No. 2 Wells Fargo and Co. plummeted 21%.
Declines in the value of derivatives also pressured Berkshire shares. Buyers of the contracts would be entitled to billions of dollars from Berkshire if four stock indexes drop below agreed-upon levels on dates beginning in 2019.
Berkshire’s stock gained $4,600, or 5%, on Wednesday, ending the day at $96,600 in New York Stock Exchange composite trading.
Pierre Paulden and Nick Baker in New York contributed to this story.