Buffett, Berkshire Navigating Subprime Better than Many

While many have criticized Warren Buffett’s recent Goldman Sachs stock buy (Goldman shares have tumbled since Buffett bought $5 billion in preferred stock on Sept. 23), Bloomberg’s Ari Levy reports that Berkshire Hathaway’s overall financial stock performance has been well ahead of the sector average in recent months. Writes Levy, “Berkshire’s bank-related investments rose 36 percent in the third quarter, while the 84-member Standard & Poor’s 500 Financials Index declined 0.2 percent.” For the past year (through September), a weighted basket of Berkshire’s financial stocks rose at an average quarterly rate of 2.3 percent, according to Bloomberg data, while the S&P financials index dropped by an average 11.4 percent per quarter over that period.

While Berkshire kept some of its largest financial stakes (those in American Express, U.S. Bancorp, and Wells Fargo) essentially unchanged in the third quarter, it cut back significantly one financial — and to its benefit. Buffett’s firm reduced its investment in Bank of America from 9.1 million shares to 5 million shares in the quarter, Levy writes. BOA’s stock has subsequently fallen about 60 percent so far in the fourth quarter.

Berkshire hasn’t fully escaped fourth quarter financial pain, however. Its financial holdings — which also include M&T Bank Corp., SunTrust Banks, Torchmark Corp. and Wesco Financial — have fallen 32 percent since the end of September (not including the Goldman investment). But they are still ahead of the S&P financial index, which has fallen 41 percent in that time, according to Bloomberg data.