Monday, 13 March, 2000, 12:34 GMT
Mr Buffett only invests in stocks he understands
Has Warren Buffett lost his touch?
For years, his name has been spoken with reverence in investor circles.
America's second-richest man is estimated to be worth more than $30bn.
But his decision to eschew technology stocks has hit profits at his investment fund, Berkshire Hathaway.
This weekend it reported a 45% drop in profits from $2.830bn to $1.557bn.
Mr Buffett takes the blame, admitting he chose the wrong stocks.
"Even Inspector Clouseau could find last year's guilty party -- your chairman," Mr Buffett said in a letter to shareholders.
The company might now consider buying back some of its shares to support its battered share price. Shares closed on Friday at $41,300, their lowest level since May 1997.
The share price was also hit by rumours earlier this year that Mr Buffett was ill.
'No' to tech stocks
Berkshire Hathaway's stock has been hurt by investor fears that it represented "old economy" stocks rather than technology companies.
One of Mr Buffett's core beliefs is that investors should buy only stocks they understand.
He admits to being a technophobe and as such is reluctant to invest in even established technology stocks.
"Investors seem wildly optimistic in their expectations about future returns," he has said. The guru also predicted a "severe" stock market correction when investors' expectations became more realistic.
Mr Buffett may yet be proved right and many seasoned market pundits agree that it is difficult to predict which net stocks will stand the test of time.
But in the short term, Berkshire Hathaway's profits have suffered, hit by losses at its insurance companies as well.
A lot of Berkshire's earnings come from insurance, through its ownership of General Re, the largest reinsurer in the US, and the car insurer Geico.
Keep it simple
Mr Buffett expects Berkshire Hathaway's performance to improve and to better the US stock indices.
"We are willing to back our conviction with our money," he said. "To repeat a fact you've heard before, well over 99% of my net worth resides in Berkshire. Neither my wife nor I have ever sold a share of Berkshire and -- unless our cheques stop clearing -- we have no intention of doing so."
 Mr Buffett is a fan of the drinks company |
"We still like these businesses and are content to have major investments in them," he said.
"But their stumbles damaged our performance last year, and it's no sure thing that they will quickly regain their stride."
The cult of Buffett
Berkshire Hathaway has attracted an almost cult following.
He has built his reputation by buying stakes in undervalued groups and holding them for a long time.
He bought early into such companies as Coca-Cola, Disney, American Express, Gillette and McDonalds.
His track record is strong. Market wisdom is that if you had invested $10,000 in Berkshire Hathaway in 1965, you would have $50m today.
If you had invested the same amount in the Standard & Poor's 500 stock index, you would have $500,000.
Warren's world
Warren Edward Buffett was born on August 30, 1930.
His father, Howard Buffett, was a stockbroker and later a US congressman.
Warren first started investing in stocks at the age of 11.
He still lives in Omaha, Nebraska and enjoys the nickname, the Sage of Omaha.
He is a creature of habit and his dislike of change is also evident in his stock holdings, which he keeps for long periods of time.
Related Links
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