Even the “Oracle of Omaha” couldn’t escape the financial maelstrom of 2008.
Billionaire investor Warren Buffett’s holding company Berkshire Hathaway swung to a first quarter loss of $1.53 billion in 2009, its first loss since the third quarter of 2001 when Berkshire suffered large insurance losses due to the Sep. 11 terrorist attacks.
The company had almost $1 billion in profit during the same period last year. However, the value of the company’s assets fell only 2.6 percent during the first quarter—and 10 percent in all of 2008—despite severe dips in global stock market prices.
Berkshire is a major player in the insurance and reinsurance industries, and the company also has stakes in almost 80 companies from retail to manufacturing. Many of its holdings suffered due to the global economic recession and tighter consumer spending patterns.
To illustrate, the S&P 500 index had declined around 12 percent year to date as of Mar. 31.
“Prices for equity securities also experienced significant declines over the first quarter of 2009, which negatively impacted the fair value of Berkshire’s equity investments (particularly in financial institutions),” the company said in an SEC filing.
The company’s losses were mainly tied to its derivative bets—financial instruments previously decried by Buffett. $986 million were attributable to payouts related to Berkshire-insured bonds that had defaulted.
Berkshire’s biggest mistake last year was his $7 billion investment in oil giant ConocoPhillips ahead of the global oil price drop last fall. This resulted in a $2 billion writedown related to its investment in ConocoPhillips as Buffett sold a portion of his holdings as crude oil prices bottomed during first quarter 2009.
“The market price of ConocoPhillips shares declined sharply over the last half of 2008. In the first quarter of 2009, Berkshire sold approximately 13.7 million shares of ConocoPhillips and sold additional shares in April,” the SEC filing said.
Two credit rating agencies stripped Berkshire of its “AAA” credit rating this year.
Berkshire’s class-A stock closed up $905 (0.96 percent) to $95,295 on Friday evening.