When Warren Buffett Speaks, It's Still Worth Listening

It amazes us to watch the fickleness of the Wall Street ebb and flow, like a tide that’s unsure of its direction. In 1989, Buffett was a genius, by 1999 he was behind the times, by 2002 a genius again, and finally “bruised” this year…

Bruised - are you serious?

Warren Buffett is the closest thing to a living legend in many investment circles. He has remained constant in his investment approach regardless of the hottest trends and mania’, and he represents the best of American buy-and-hold strategy.

And just because his stock price has slipped this year we’re already questioning his market wisdom?

This year found him writing an op-ed for The New York Times, on why he’s buying stock. As for performance this year, Buffett’s investment vehicle Berkshire Hathaway (BRK.A) is such a massive company that it looks more like a mutual fund. It makes sense that if the broad market is down, then Berkshire would be as well.

Buffett has been picking up shares and preferred stock from dozens of Wall Street’s battered institutions. And the attractive interest rate terms he requires, and gets, are something any money manager would look on with admiration.

Berkshire Hathaway’s BRK.A stock is trading almost at half the price of its 52-week high. You’d have to go back to 2003 to see bargains like we have right now. The BRK.B shares are trading around $2,400 and represent an attractive price to buy into the investments of a master.

With his much-awaited Berkshire annual report due out tomorrow (Saturday), investors won’t have to wait much longer to “hear the words from the mountaintop,” as it were. It’ll be interesting to see if his words alone can pull up the price of his stock.

Comments

[xsellside:]

I couldn't agree more. People forget that BRK.A/B is outperforming the S&P 500 on 3, 5, and 10 year basis. Lost his touch? Really? On a 1 year basis, BRK.A/B is performing in-line with the market, but remember that we just went through a period of FORCED and INDISCRIMINATE selling. Few stocks were immune last year, not even Mr. Buffett's.

Feb 27 12:57 PM

[M dub:]

you'd have to go "all the way back" to 2003 to see these bargains? somehow that doesn't sound like such a deal....in a heavily declining earnings environment.

Feb 27 01:11 PM

[luc ky:]

We'll see....

Feb 27 01:37 PM

[techzone12:]

Buffett is someone that I admire. He inspires me, but I don't follow his steps blindly. I have been hearing him saying it's time to buy (for a while now), but I was not convinced. So I stayed out (I stayed completely out since December of 2007).

I know the paradigm is that no body can time the market, but that does not stop me from trying anyway!. I am not trying to perfectly time the market by the way, I am just playing some defense to avoid being slaughtered in this market. It's called risk management.
I believe that the momentum is still pointing downward. But in my opinion, the climate has to shift first, before we can see some sustained growth. To get a remedy, you need to treat the disease (which is foreclosures) and not "just" deal with the symptoms.

Feb 27 01:57 PM

[Chris B:]

If you buy Berkshire's stock, what happens to your investment on the day Buffet drops dead?

Perhaps instead of investing in a guru, you should learn how to analyze companies as he has done. Buffet has been so kind as to provide extensive writings on the subject, even if his most ardent followers are more aware of his results than his methods. Oh well, you can lead a horse to water...

This little article contributes nothing to a deeper understanding of investing. It just says follow the guru and don't worry about doing your own homework.

Feb 27 02:36 PM

[PROXIMO:]

"Warren Buffett is the closest thing to a living legend in many investment circles." Unlikely that the " living legend" status remains intact much longer. So sorry.

Feb 27 03:14 PM

[CautiousInv...:]

We can expect Berkshire to report pretty lousy earnings this weekend.

Any investor must respect Mr Buffet although he recently come under fire for acquisitions, selling long dated put contracts and the performance of Berkshire.

Whatever the outcome, it will be too early to draw definitive conclusions as he thinks in very long time frames. But we can be sure Mr Buffet will take full responsibility and, if required, learn from any lapses in judgement.

Feb 27 03:35 PM

[Brad Castro:]

I agree. Buffett makes what he does look a lot easier than it is (acquiring long term quality companies at attractive prices). He undoubtedly has more worshippers than disciples, but that doesn't discount his amazing investment record.


On Feb 27 02:36 PM Chris B wrote:

> If you buy Berkshire's stock, what happens to your investment on
> the day Buffet drops dead?
>
> Perhaps instead of investing in a guru, you should learn how to analyze
> companies as he has done. Buffet has been so kind as to provide extensive
> writings on the subject, even if his most ardent followers are more
> aware of his results than his methods. Oh well, you can lead a horse
> to water...
>
> This little article contributes nothing to a deeper understanding
> of investing. It just says follow the guru and don't worry about
> doing your own homework.

Feb 28 09:10 AM

[ArtfulDodger:]

Buffett is a great stock picker, no doubt.

But he's an even better deal maker. That's for sure.

Just look at his record of buying companies and coming to the aid of those in need: he gets the plum in the pudding before he moves.

Feb 28 01:27 PM

[mkreisel:]

BRK's derivative exposure is close to $70 billion now:
$40 from index puts;
$10 from CDS;
$20 from BHAC.

Feb 28 02:26 PM

[xsellside:]

FYI - BRKs annual report was out this morning with WEBs letter to shareholders: www.berkshirehathaway....

There is an excellent discussion of derivatives and BRK's long-dated put options on market indexes.

Feb 28 02:37 PM