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Sunday, 1 March 2009

Buffet : I did some "dumb things in investments"

In his annual letter to Berkshire Hathaway shareholders, Warren Buffett says he did some "dumb things in investments" last year.

The letter has just been posted on the company's website.

Buffett admits that "I made at least one major mistake of commission and several lesser ones that also hurt... Furthermore, I made some errors of omission, sucking my thumb when new facts came in that should have caused me to re-examine my thinking and promptly take action."

The mistake of commission: buying a large amount of ConocoPhillips [COP 37.35 -1.10 (-2.86%) ] stock just as energy prices were near their peak. Buffett writes, "I in no way anticipated the dramatic fall in energy prices that occured in the last half of the year." He still thinks oil will eventually go well above its current $40-$50 range, "but so far I have been dead wrong."

Even if energy prices do rise, "the terrible timing of my puchase has cost Berkshire several billion dollars."

But he says he's not bothered by the "significant decline" in Berkshire's portfolio. "We enjoy such price declines if we have funds available to increase our positions."

The letter also reveals a 9.6 percent decline in Berkshire's book value per-share last year, making 2008 the company's worst year since Buffett took over in 1965. Book value fell by $11.5 billion during the year.

There has been only one annual decline before this one. In 2001, book value fell 6.2 percent.

Compared to the S&P, however, Berkshire's drop is relatively small. With dividends included, the S&P's book value fell 27.4 percent, giving Berkshire its biggest "win" since 2002.

In the letter, Buffett notes that it was also the S&P's biggest decline during the past 44 years.

"By yearend, investors of all stripes were bloodied and confused, much as if they were small birds that had strayed into a badminton game."

1 comment:

gudipudi said...

Its so unfortunate . But due to this slow economic time, its comes by no surprise

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