Berkshire Hathaway Inc. (NYSE: BRK.A) stock has fallen 26% this year to a low not seen since February 2007. That does not sound great, but compared to the S&P's 42% drop so far in 2008, Buffett looks relatively good.
Buffett has been in the news quite a bit lately. His biography tops the business book best seller list and he's been flogger-in-chief for the administration's $810 billion bailout plan -- since it was signed into law, the NYSE index has lost $3.8 trillion of its market capitalization. He's also been trying the cheer-lead America into buying stocks.
But I am wondering whether all this cheer-leading was part of the deal that allowed him to get 10% interest payments and warrants to buy The Goldman Sachs Group (NYSE: GS) and General Electric Company (NYSE: GE) a few weeks ago -- their stocks are well below the $115 and $22.25 a share exercise prices on those warrants. Along with his painful loss of wealth, Buffett's reputation has taken somewhat of a tumble as a result of his getting out in front of what now looks like a bad bailout approach.
In December 2007, Barron's thought Berkshire was 10% overvalued when it traded at $151,650 a share. By Barron's reckoning, it should have traded at $130,000. Based on today's price of $102,250 a share, Barron's was way too conservative in estimating how far it should fall -- it's down 33% since then.
Does Berkshire have further to fall? I don't know but I'd be more bullish on Berkshire if Buffett use some of his cash to buy up more shares at today's lower price.
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns GE stock and has no financial interest in the other securities mentioned.
Cramer on BloggingStocks: Investors are rethinking their snap judgments 
Lions Gate Entertainment: Still waiting for cash flow
Before the bell: Stocks ready for a lower open after reaching 13-month highs
Reader Comments (Page 1 of 1)
10-28-2008 @ 1:04PM
Gary E. Sattler said...
Maybe Buffett's slippage has something to do with Obama continually dropping his name.
Ya think?
10-28-2008 @ 1:55PM
Iridium said...
Buffet is nothing more than a stock trading Al Capone. He uses the same tactics and strategy that allowed Capone to build a great fortune and influence a market. One is called a criminal and the other an oracle of business. Perhaps that is why people are so interested in him.
What goes on in an organized crime syndicate and a backroom hedge trade isn't so different.
Buffet got caught trying to make a play to influence the market in his direction. The days of invesotrs like Buffet are over. It isn't easy to hide from the media anymore since the advent of the blog and internet news.
10-28-2008 @ 2:44PM
ATHELSTAN said...
Buffett and George Soros, both Democrats and liberals, have beaten the Republicans at their own game. They haven't disgraced themselves in any way, shape, or form.
Strange to hear conservatives belly aching about Buffett's business tactics when Americans have been witnessing the worst, and, in many ways, the most ineffectual business practices by a Treasury Department in history. Practiced by the most incompetent, supposedly business-oriented administration, in history.
10-29-2008 @ 8:42AM
Susan said...
"Right now it is costing the treasury $945 billion per year to
provide income tax deductions, tax preferences, loopholes, credits,
and favors provided by the current tax code. Only those who qualify
for these breaks and itemize their returns receive these tax benefits
and 70% of filers do not itemize. Under the FairTax plan ALL
Americans receive monthly prebates to reimburse consumption taxes
paid up to the poverty level, guaranteeing that no American pays the
23% FairTax to purchase the basic necessities of life. These
prebates would cost the treasury $489 billion."