Berkshire Hathaway Book Value Up 20% in 2009; Portfolio Shuffle
February 27, 2010 - 9:37 am
Berkshire Hathaway's book value rose 20% last year, but still underperformed the S&P 500 stock index, according to Warren Buffett's 2009 letter to shareholders. This is only the seventh time in historyBuffett (above) has underperformed the broad market averages.
Berkshire's book value per share rose from $70,530 to $84,487 in a recovering stock market and as a result of the $23.6 billion acquisition of Burlington Northern railroad. Berkshire's investment portfolio, which was valued at $49 billion at the close of 2008, is worth $59 billion as of Dec. 31, 2009.
Berkshire is unlikely to make another big acquisition soon as its cash position is only $30 billion. Buffett emphasized that the BNSF railroad deal, like electric utilities, "will require heavy investment that exceeds depreciation allowances for decades to come."
As is his custom, Buffett was transparent about the problems facing some Berkshire operations. In the housing industry, for example, Buffett disclosed that output of modular homes has fallen in a decade from 382,000 units to 60,000 units. "The industry is in shambles," he wrote. Jokingly he suggests solutions for the overhang of unsold homes to be "blow up a lot of houses ... speed up household formations by encouraging teenagers to cohabitate ... or reduce new housing starts to a number far below the rate of household formations."
Berkshire's book value per share rose from $70,530 to $84,487 in a recovering stock market and as a result of the $23.6 billion acquisition of Burlington Northern railroad. Berkshire's investment portfolio, which was valued at $49 billion at the close of 2008, is worth $59 billion as of Dec. 31, 2009.
- Buffett increased his position in Wal-Mart from 19.9 million shares to 39 million shares and added to his ownership of Wells Fargo, a bank battered by the financial crisis, as well as U.S. Bancorp, drug giant Sanofi-Aventis and Tesco, a British retail chain.
- However, he massively reduced Berkshire's position in Conoco-Phillips from 5.7% of the company to 2.5%.
- Other adjustments included the addition of 9.9% of BYD Co., the Chinese electric car manufacturer, and the reduction in holdings of Johnson & Johnson, and Procter & Gamble, both multinational consumer-product companies. (Full list of Berkshire Hathaway's $1B+ investment shareholdings.)
Berkshire is unlikely to make another big acquisition soon as its cash position is only $30 billion. Buffett emphasized that the BNSF railroad deal, like electric utilities, "will require heavy investment that exceeds depreciation allowances for decades to come."
As is his custom, Buffett was transparent about the problems facing some Berkshire operations. In the housing industry, for example, Buffett disclosed that output of modular homes has fallen in a decade from 382,000 units to 60,000 units. "The industry is in shambles," he wrote. Jokingly he suggests solutions for the overhang of unsold homes to be "blow up a lot of houses ... speed up household formations by encouraging teenagers to cohabitate ... or reduce new housing starts to a number far below the rate of household formations."
Tags: berkshire hathaway, buffett, BYD, Conoco-Phillips, Wal-Mart
Read Buffett's full letter to shareholders here.
http://www.berkshirehathaway.com/letters/2009ltr.pdf
Read Buffett's full letter to shareholders here.
http://www.berkshirehathaway.com/letters/2009ltr.pdf
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