Warren Buffett, the world’s most famous investor, has become a “cult figure”, thanks to his “homespun aphorisms” and his stockpicking prowess, said Erik Holm on Bloomberg.com. So no wonder the annual general meeting of Berkshire Hathaway (NYSE:BRK.B), his investment vehicle with holdings in almost 80 businesses, including a giant insurer, has been dubbed a “Woodstock for capitalists”. But this year, “there wasn’t as much free-flowing love” as usual, given what a tough year it had been for capitalists, said Andrew Ross Sorkin in The New York Times – Buffett included.
As he says, he didn’t exactly cover himself with glory. Berkshire’s book value slid by 9.6% last year, the worst performance in the 44 years that Buffett has been in charge, and fell further in the first quarter. Berkshire lost its triple-A credit rating amid the financial sector market turmoil, and Buffett also “made a couple of howlers”, as Bruce Jackson put it on Fool.co.uk. He bought shares in oil major ConocoPhillips when oil was close to its peak, and his stock in two Irish banks cratered.
Another cause for concern has been his dabbling in derivatives, which he lambasted a few years ago as “weapons of mass destruction”. He has used them to bet on the long-term direction of stocks and corporate debt, and soaring bankruptcies presage losses on some credit default swaps this year. However, Buffett uses straightforward derivatives carefully, said Richard Beales on Breakingviews, and Berkshire can “easily handle” the expected losses.
But don’t write Warren Buffett off yet
Buffett’s halo may have lost some of its shine in 2008, but he can hardly be written off. His focus has always been on buying businesses on the cheap and holding them for a long time, said the FT. He has never promised short-term returns, even though he almost always happens to deliver them: Berkshire has outperformed the S&P 500 in 38 of 44 years. Having produced 84 times the return of the overall stockmarket since 1965, “he should rest easy”.