AuGod!

Buffett's Recent Portfolio Changes: What's the Message?

Most know Warren E. Buffett as one of the world's most savy investors, and recently (Sept. 08) we can look to Goldman Sachs for some justification for that. His position in Goldman is probably now worth $9.1 billion, or about $4.1 billion more than what he paid 11 or so months ago. An Assistant Professor of Finance Linus Wilson, (University of Louisiana at Lafayette) calculated, Buffett's annualized return would be 111 percent if he sold his Goldman shares, which are held by his Berkshire Hathaway firm. It was noted that "in comparison, the federal government received a 23 percent annualized return for its Goldman investment." Goldman sought a cash infusion from Buffett last September for which he (Berkshire) received perpetual preferred shares in Goldman, which pay a 10 percent annual dividend, or $500 million a year. My source, widely read and publicly available, claimed that "Berkshire Hathaway also received warrants to buy $5 billion in common stock at a strike price of $115 a share, which could be used at any time within five years of the initial investment." And Professor Wilson's valuation included "a $5.5 billion valuation to Buffett's preferred shares and $3.2 billion to the warrants." It was said that Berkshire's reinvested dividends from the Goldman stake were worth about $400 million. The analysis was based on Goldman's closing share price of $160.46 in late July 2009. Now ladies and gentlemen, I know this is one example and that he has had his ups and downs but be fair. Can he still cook or can't he? Just a question with no political undertones.