Though stock markets worldwide showed signs of recovery in 2009, Warren Buffett’s magic touch could not help Berkshire Hathaway Inc.’s shareholders much at the bourses. The company posted its worst performance of the decade in 2009 as compared to the indices. Its shares advanced only 2.7% during last year as against about 23% return offered by the Standard and Poor’s 500 Index. This certainly calls for a reconsideration of Berkshire’s strategies, which has beaten the index in 15 out of last 22 years.
Experts consider Buffett’s $26 billion commitment to a railroad takeover and lowering of his expectations for investment return caused the damage. It’s Berkshire’s worst performance since 1999, when the company’s shares had offered a negative return of 20% as against 20% by S&P 500.
Even Buffett, who has managed a 30-fold increase in Berkshire in last 20 years by his vulture strategy and brilliant acquisitions, now accepts that the purchase of Burlington Northern Santa Fe Corporation (parent company of BNSF railway) in November last year was not ‘cheap’. The deal has brought Berkshire 37,000 workers and a share of a regulated industry. Buffett now expects to get just “a decent return,” from the deal, that too in a very long run.
Moreover, Berkshire’s bottom-line also took a shot last year. It fell nearly 50%. Though Buffet’s stockpiling of $44 billion in cash helped the company to mop up some good value by financing Goldman Sachs, GE, Swiss Re and Mars Inc’s take over of Wrigley, losses at Berkshire’s NetJets subsidiary and decline in earnings at Clayton Homes contributed to the fall in Berkshire’s pre-tax profit. The good news, however, is that experts believe Berkshire’s profit will show a steady rise in 2010. Hope the Oracle of Omaha’s magic does the job for Berkshire’s shareholders this year.