This got me thinking about my pal Warren, a frequent topic of conversation in business and investment circles, and how he amassed such a great fortune over the past five decades.
He is a long way from owning the world but he has started to expand his horizons to the international scene. He has bought and sold PetroChina (NYSE: PTR) for a tidy $4 billion dollar profit and he has been hedging against the dollar for the last few years with mixed results. He bought an Israeli metal fabricator and he has splashed about in Europe and Asia.
If you read Berkshire Hathaway's (NYSE: BRK.B) annual reports you will find the chairmans letters, where Buffett discusses both his successes and his failures. It is his failures and the fact that he does not make the right call every time that I wish to draw attention today. BloggingStocks promotes much debate, sometimes name calling, and sometimes worse. However, it is important to understand that even the best investors make mistakes.
One of my favorite sayings, paraphrased, is Those who make no mistakes, usually make nothing at all. It is important to be actively doing things if you expect to accomplish anything. Assume you will make mistakes and take them in your stride. If you bought Berkshire Hathaway stock at the beginning of the year, you may feel you made a mistake since it is down about 18%. That is worse than the DJIA , S&P 500 or NASDAQ indices, which are only down about 14% collectively.
Although I cannot turn back the clock, I can say that in these troubled economic times you at least could be relatively confident that you were not going to lose your money, as I, and many others did with certain financial stocks. I wrote about Berkshire as a safe haven: Serious Money: How safe were BRK, BUD, PG, SO, & UPS?
Today, I think it is worth considering BRK.B again. The stock, at $3,892 as I type this around noon eastern, is about 23% off its $5,059 high. The company has the strongest balance sheet to be found and is triple-A rated. It has tens of billions in cash that Buffett is deploying at a time when world markets are down, and others have little or no money to invest.
Buffett's bargain hunting is highly likely to materialize into out-sized profits, but if nothing else, putting a portion of your hard earned money in this safe haven is a good long-term place to be while the world repairs itself, regardless of the time frame you believe that will be.
UPDATE: Final $3,855.10, down -$45.00 (-1.15%)
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. DISCLOSURE: I currently own shares of BRK.B, and PTR.
Reader Comments (Page 1 of 1)
8-20-2008 @ 6:52PM
william lindblad said...
For what it is worth - money as we know it, it merely a trading method. The amount that one accumulates is relative to wants and needs. There also comes a point, as in Buffet's case, where it is more a status symbol than anything else. Bill Gates found himself in this position and went the way of Carrnegie. In short, chasing wealth is fine. Chasing wealth with the idea of thumbing ones nose at the rest of the world is arrogance. Doris Duke could not leave her estate without an armed guard on hand
Two ironies - Duke University and HHMI.
8-20-2008 @ 7:23PM
Sheldon L said...
Bill,
It is always nice to see your valuable commentary.
8-20-2008 @ 8:44PM
Joseph Russell said...
Upon discovering lagging returns on my investments managed professionally some 30 years ago, I withdrew my investments and decided to manage them myself by diversifying into what were considered good mutual funds. I then learned my second lesson that the average mutual fund underperforms the market and that I was paying fees for this shortfallying. I finally got tired of trying to do the impossible for the individual investor.....reading the mutual funds' quarterly reports. So over the last 25 years or so I have managed my own portfolio reasonably successfully of 20 to 30 individual stocks. Like many individual investors, I still felt a little queasy about managing my own investments but at least I could read the quarterly reports and I usually was able to outperform the indexes. Despite having a terrific broker who is not only knowledgeable but also good at holding my hand in the tough times, the idea of a professional manager still seemed a good one. Then I discovered Berkshire B. You have a great professional manager with ridiculously low overhead who pays himself $125,000 a year who has regularly outperformed the market most years. So when I think "mutual fund" or "professional management", I think Berkshire Hathaway. So for guys like me who like to manage their own stuff and don't really like the regulation, fees, structure, and returns involved in mutual funds but still like the idea of a professional manager, Berkshire is a great idea as an addition to just about any portfolio and it
seems like a great time to buy in on this dip.