By SCOTT PATTERSON
By many measures, Warren Buffett had a good financial crisis.
The balance sheet of his conglomerate, Berkshire Hathaway, didn't suffer major blows. Mr. Buffett used his vast cash stockpile to scoop up bargains, including a $5 billion investment in Goldman Sachs Group preferred shares. Their value has soared this year as Goldman's stock has risen about 50% since his investment.
![[Falling Behind]](http://s.wsj.net/public/resources/images/MI-AZ199A_AOT_NS_20091008191616.gif)
But Berkshire's shares tumbled in 2008 with the rest of the market, and are up just 4% this year compared with a 12% gain by the Dow Jones Industrial Average.
Why the lag? Analysts struggle to pinpoint an immediate concern, but one that is looming larger is the leadership plan. Mr. Buffett turned 79 years old in August and continues to hold an iron grip on Berkshire, a sprawling empire of diverse companies. He has kept his succession plans close to the vest, and investors may be worried about what comes next.
Meyer Shields, an analyst with Stifel Nicolaus, focused partly on this issue when he initiated coverage of Berkshire last week with a "hold" rating. He thinks the Buffett Premium -- the intangible assets Mr. Buffett brings to the company, including his go-to status for companies seeking an investment -- will fade from the stock.
"Buffett's knowledge and skills are replaceable," he wrote, "but since his iconic status isn't, the economic attractiveness of Berkshire's future investment opportunities will likely decline."
Investors lately are more focused on highly volatile sectors, such as bank stocks. The S&P 500-stock index, heavy with financials, is up 18% this year. The Russell 2000 index of small companies is up 22%.
By some measures, Berkshire is now a deal. Its price-to-book ratio, the stock price of the company divided by the total value of its balance sheet, is about 1.35, according to estimates by Paul Howard, an analyst at research firm Langen McAlenney. That compares with an average annual ratio of 1.6 going back to 1996.
Eventually, the risky-stock rally will fade. When it does, investors seeking better deals likely will gravitate to more-plodding value stocks such as Berkshire, said Mr. Howard.
But their enthusiasm will depend on their confidence in Berkshire after Buffett.
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