The Pain of Chasing Warren Buffett (BRK-A, GS, GE, WFC, AXP, BNI, COP, MCO, USB)

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Berkshire Hathaway Inc. (NYSE: BRK-A) (NYSE: BRK-B) does not go for short-term gains, and short-term losses are part of the game for investing. Warren Buffett has even told employees to only to worry about walking the straight line and everything else fall into place.  But whenever Buffett is found to have invested in a company, its stock is immediately pushed up by other investors.  After reviewing some of his portfolio holdings where his outlook is "forever," you will notice how painful that has been for investors who have chased Buffett’s picks.  Most of the public does not invest with a "forever" time frame. We have only included those stakes where Buffett has sizable investments.

You can look at the changes in his recent positions or his add-on positions in Goldman Sachs Group Inc. (NYSE: GS), General Electric Co. (NYSE: GE), and Wells Fargo & Co. (NYSE: WFC) to see how much some of these stocks have come down.  There are of course many caveats and we are certainly not suggesting that Mr. Buffett only picks stocks which go down.  He would be the first to tell you he can’t control the market, and he would also say that he doesn’t care about the stock market performance in any given short period.

Buffett bought $3 billion worth of preferred stock in General ElectricCo. (NYSE: GE) on October 1.  While you could not havebought that deal, you could have very easily bought the common stock.Shares were at $24-ish right before that offering, so if you chased hismove you would now be down anywhere from 20% to about 33% if you bought andheld.

Buffett purchased $5 billion in preferred stock in Goldman Sachs GroupInc. (NYSE: GS) on September 24.  You couldn’t have gotten the10% yield that Mr. Buffett got, but if you bought into the common stockthen north of $130.00, your current losses would be down nearly 40%.

Shares of American Express Inc. (NYSE: AXP) are down more than 60% from last May. With some 151+ million shares, each $7.00 change in the price of AmEx is worth more than $1 billion in value.  He’s down far more than that today.

Burlington Northern Santa Fe (NYSE: BNI) is one where investors wouldbe down substantially in if they bought at any point in 2007 besidesNovember and December of 2008.  Here Buffett kept adding to his position by"being put" in shares via options.  His stake now is more than 70million shares.

ConcoPhillips (NYSE: COP) was one that Buffett had asked to have ahidden position in with the SEC since earlier last year.  The good newsis that this has recovered from lows over the last two months, but thisone is still off to the point that Mr. Buffett could be looking at a $2billion loss on today if the whole story is really public there.  Maybe Buffett and T. Boone Pickens havesomething in common besides being old market seers worth more money than 99.999% of the country could ever hope.

Moody’s Corp. (NYSE: MCO) is one where Mr. Buffett has been holding asubstantial position of 20% of the company via a 48 million sharestake.  He’s down 50% from last summer’s highs.  Moody’s has also losttwo-thirds of its value in the last two years.  That’s a three-comma loss in dollar terms, and this company is among the most hated in the U.S. since it is owner of one of the disgraced ratings agencies.

US Bancorp (NYSE: USB) is one where Mr. Buffett is down roughly $1 billion in just the last few months.
Keep in mind that Warren Buffett does not really try for short-termnor the intermediate-term market timing.  We have never alleged that hethinks that way.  But some of the percentage drops from his holdingsmight make you wonder if Mr. Buffett has at least rolled his eyes afterlooking at some of the drops. 

If he hasn’t, then perhaps he should consider hitting the till on someof these and adding to those positions.  Here is a list of his holdings in alphabetical order.

Jon C. Ogg
January 8, 2009

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