By Erik Holm
Feb. 20 (Bloomberg) -- Warren Buffett’s Berkshire Hathaway Inc. fell to its lowest price in five years in New York trading amid investor concern about possible losses on bets the billionaire chairman has taken on world stock markets.
Berkshire Class A shares, the most expensive on the New York Stock Exchange, fell $3,600, or 4.6 percent, to $75,000 at 11:14 a.m. in composite trading, the lowest since September 2003. The stock of the Omaha, Nebraska-based firm has plunged 48 percent in the past 12 months.
The bets, in the form of derivatives that may require Berkshire to pay as much as $37 billion, require the firm to take writedowns in quarters where stock markets fall and volatility increases, even though Berkshire wouldn’t pay out on the contracts until at least 2019. Four of the world’s stock markets would have to drop to zero for Berkshire to pay the maximum amount to the firms that took the opposite side.
‘It’s possible there could be a big writedown when they report those fourth-quarter numbers,” said Bill Bergman, an analyst with Morningstar Inc. who gives Berkshire five stars, his firm’s highest rating. “There’s clearly some concern out there, but it still seems like a fairly conservative position.” Berkshire may report fourth-quarter results next week.
Buffett owns about one-third of Berkshire’s Class A shares and about 14 percent of the Class B stock, which is 1/30th of a Class A share, according to Bloomberg data.
Buffett, ranked the richest man in the U.S. by Forbes magazine, transformed Berkshire from a failing textile maker into an enterprise with businesses ranging from ice cream and underwear to corporate jet leasing. He has never split the stock.
Buffett told an interviewer in November that the firm’s declining stock price “doesn’t make any difference” to him.
“You own a business,” Buffett said of shareholders in an interview with the Fox Business Network. “If I own a farm here, which I do, I don’t get a quote on it every day, you know? And it may have gone down 50 percent at some point. I don’t even know about it. I look to the farm and I look to the business to determine the results.”
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