<TABLE cellSpacing=0 cellPadding=0 width=452 border=0><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published November 28, 2008
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Buffett's financial picks paying off for Berkshire
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(NEW YORK) Billionaire Warren Buffett's decision to increase his stake in financial companies led by Wells Fargo and US Bancorp and avoid sub-prime lenders is paying off for Berkshire Hathaway Inc.
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</TD></TR><TR class=caption><TD></TD></TR></TBODY></TABLE>Berkshire's bank-related investments rose 36 per cent in the third quarter. Berkshire ranked as the biggest shareholder of Wells Fargo and US Bancorp at the end of September, according to Bloomberg data.
'In one word, I can sum it up: patience,' said William Frels, chief executive officer of Mairs & Power in St Paul, Minnesota, which owns shares of Wells Fargo and US Bancorp and has Berkshire stock in some client accounts.
'Warren has the luxury of being able to exercise patience, where most of the other players are under the gun to make things happen and can't sit around and wait for opportunities.'
A weighted basket of Berkshire's financial stocks rose at an average quarterly rate of 2.3 per cent during the past year through September, Bloomberg data show. The S&P financials dropped by an average 11.4 per cent per quarter in the same stretch. The index slumped 60 per cent this year as new home sales fell to the lowest in 17 years.
Berkshire has gained at an average annual rate of 21 per cent over the past two decades, exceeding the 12 per cent advance of the S&P 500 Index. It's financial investments have dropped 32 per cent since Sept 30, excluding a US$5 billion investment in Goldman Sachs Group, reducing Mr Buffett's profits. The S&P financials index fell 41 per cent in the period.
Berkshire's third-quarter holdings, released this month, show that the company had trimmed its stake in Wells Fargo by a tenth of one per cent since June to 290.4 million shares, valuing the investment at US$7.8 billion as of yesterday.
Berkshire increased its holdings of Minneapolis-based US Bancorp by 6.3 per cent to 72.9 million shares. Berkshire kept its stake in American Express at 151.6 million shares, remaining the credit-card company's biggest investor. The only financial company Berkshire moved away from in the third quarter was Bank of America Corp, cutting its stake to five million shares from 9.1 million. Bank of America did what Mr Buffett refused to do - buy Countrywide Financial, the sub-prime lender plagued by tumbling home prices and record foreclosures.
Mr Buffett said in October last year that he 'never came close' to acquiring Countrywide shares. He also has denied reports that he considered buying part of Bear Stearns Cos, the securities firm that was later bailed out by JPMorgan Chase & Co.
'The fact that he was smart enough to take a pass on so many deals that have gone sour indicates that he correctly saw that things were going to get worse,' said Whitney Tilson, managing director of hedge fund T2 Partners LLC.
The Goldman Sachs investment has yet to bear fruit. Berkshire agreed to buy US$5 billion of its perpetual preferred shares on Sept 23 and received warrants for another US$5 billion at US$115 a share. The stock has since tumbled about 40 per cent to US$71.78. Still, Mr Buffett will get a 10 per cent annual dividend on the preferred securities.
Berkshire Class A shares dropped by 32 per cent this year, and 12 per cent last month, the worst month since 2000, as the company's profit fell for four straight quarters.
The shares rose above US$100,000 on Wednesday. -- Bloomberg
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</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Buffett's financial picks paying off for Berkshire
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</TD><TD>Feedback</TD></TR></TBODY></TABLE>(NEW YORK) Billionaire Warren Buffett's decision to increase his stake in financial companies led by Wells Fargo and US Bancorp and avoid sub-prime lenders is paying off for Berkshire Hathaway Inc.
<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD>
</TD></TR><TR class=caption><TD></TD></TR></TBODY></TABLE>Berkshire's bank-related investments rose 36 per cent in the third quarter. Berkshire ranked as the biggest shareholder of Wells Fargo and US Bancorp at the end of September, according to Bloomberg data.'In one word, I can sum it up: patience,' said William Frels, chief executive officer of Mairs & Power in St Paul, Minnesota, which owns shares of Wells Fargo and US Bancorp and has Berkshire stock in some client accounts.
'Warren has the luxury of being able to exercise patience, where most of the other players are under the gun to make things happen and can't sit around and wait for opportunities.'
A weighted basket of Berkshire's financial stocks rose at an average quarterly rate of 2.3 per cent during the past year through September, Bloomberg data show. The S&P financials dropped by an average 11.4 per cent per quarter in the same stretch. The index slumped 60 per cent this year as new home sales fell to the lowest in 17 years.
Berkshire has gained at an average annual rate of 21 per cent over the past two decades, exceeding the 12 per cent advance of the S&P 500 Index. It's financial investments have dropped 32 per cent since Sept 30, excluding a US$5 billion investment in Goldman Sachs Group, reducing Mr Buffett's profits. The S&P financials index fell 41 per cent in the period.
Berkshire's third-quarter holdings, released this month, show that the company had trimmed its stake in Wells Fargo by a tenth of one per cent since June to 290.4 million shares, valuing the investment at US$7.8 billion as of yesterday.
Berkshire increased its holdings of Minneapolis-based US Bancorp by 6.3 per cent to 72.9 million shares. Berkshire kept its stake in American Express at 151.6 million shares, remaining the credit-card company's biggest investor. The only financial company Berkshire moved away from in the third quarter was Bank of America Corp, cutting its stake to five million shares from 9.1 million. Bank of America did what Mr Buffett refused to do - buy Countrywide Financial, the sub-prime lender plagued by tumbling home prices and record foreclosures.
Mr Buffett said in October last year that he 'never came close' to acquiring Countrywide shares. He also has denied reports that he considered buying part of Bear Stearns Cos, the securities firm that was later bailed out by JPMorgan Chase & Co.
'The fact that he was smart enough to take a pass on so many deals that have gone sour indicates that he correctly saw that things were going to get worse,' said Whitney Tilson, managing director of hedge fund T2 Partners LLC.
The Goldman Sachs investment has yet to bear fruit. Berkshire agreed to buy US$5 billion of its perpetual preferred shares on Sept 23 and received warrants for another US$5 billion at US$115 a share. The stock has since tumbled about 40 per cent to US$71.78. Still, Mr Buffett will get a 10 per cent annual dividend on the preferred securities.
Berkshire Class A shares dropped by 32 per cent this year, and 12 per cent last month, the worst month since 2000, as the company's profit fell for four straight quarters.
The shares rose above US$100,000 on Wednesday. -- Bloomberg
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