Everything Warren Buffett: THE STREET.COM: Berkshire Slide Adds to Insults

Friday, February 20, 2009

THE STREET.COM: Berkshire Slide Adds to Insults

Warren Buffett's suffered his share of criticism lately, but perhaps the most stinging indictment is the falling share price for his Berkshire Hathaway (BRK.A Quote - Cramer on BRK.A - Stock Picks) investment business.

Berkshire class A shares closed at $78,600, a loss of $1,400. This is only the second time since 2003 that the price fell below $80,000 a share. Shares of Berkshire are now down more than 40% over the last 12 months.

While today's 1.8% decline is only a drop in the bucket for Berkshire's stock, it's significant enough to catch the eye of investors and surely can't be making billionaire Warren Buffett happy. Of course, being lambasted for selling off some of the big U.S. brands in his portfolio probably doesn't help his mood.

Gary Ransom, analyst with Fox-Pitt Kelton, said that the move in Berkshire's Class A stock Thursday was basically on par with the decline on the S&P 500, although there has been some negative headlines lately that have pushed the stock down in the last few weeks.

Swiss Re, which received a $2.6-billion capital injection from Berkshire earlier this month, said Thursday that it swung to a fourth-quarter loss as bad investments piled up. On Wednesday, Standard & Poor's downgraded Swiss Re to A+ from AA-, citing investment losses that have destroyed the insurer's capital.

Another Berkshire investment, Constellation Energy (CEG Quote - Cramer on CEG - Stock Picks), said Wednesday that it swung to a fourth-quarter loss under the weight of merger costs from a $4.7-billion failed attempt by MidAmerican, which is 87%-owned by Berkshire, to acquire the company.

In a 13-F filing with the Securities and Exchange Commission, released Monday but representing the fourth quarter, Berkshire showed that it has been downsizing positions in Procter & Gamble(PG Quote - Cramer on PG - Stock Picks), Johnson & Johnson(JNJ Quote - Cramer on JNJ - Stock Picks) and other stocks even as it added to its share count for Constellation Energy.

"There was some negative news on Swiss Re, which they invested in. It's been downgraded after they bought all of that," said Ransom. "Constellation Energy had a really bad quarter, and while it wasn't down that much and it's not even that big, it's a headline risk thing. But that all happened in the fourth quarter, it's not happening now."

Another explanation for the movement in share price is that Berkshire is expected to report fourth-quarter earnings in the very near future. While the company does not provide specific dates for earnings, as Buffett is known to frown upon focusing on quarterly results, the last earnings release came on Nov. 7, more than three months ago.

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