Billionaire Warren Buffett likes to say his favourite length of time to hold a stock is ‘forever’. That’s a good thing because some of his more recent investments aren’t making him money in the short run.
Buffett, 78, ranked the richest man in the US by Forbes magazine, placed bets over the past two years on companies ranging from Kraft Foods and Johnson & Johnson to oil producer ConocoPhillips. After last year’s 38 per cent drop in the Standard & Poor’s 500 Index, they are among the stocks trading at less than what he paid when he last added their shares to the holdings of his Berkshire Hathaway.
The man heralded as the ‘Oracle of Omaha’ tells acolytes he evaluates companies based on their stability, their competitive advantage and what he thinks they’ll be worth years into the future, instead of trying to find the moment when their stocks are at their lowest. The declines in his recent equity purchases suggest he could have waited before taking the plunge.
“People like to second guess Warren Buffett, but it’s not just a flip question to ask if he should have kept his powder dry a bit longer,” said Jeff Matthews, author of ‘Pilgrimage to Warren Buffett’s Omaha’ and founder of Ram Partners, a hedge fund in Greenwich, Connecticut. “He’s paid dramatically higher prices than where some of them are now trading at, so you have to wonder if he was too quick on the trigger.”
Buffett, who makes most of the investment decisions at Omaha, Nebraska-based Berkshire, wasn’t immediately available to comment. He is required to disclose changes to the firm’s equity portfolio every three months.
The latest report, covering the period ended December 31, is scheduled to be filed this week. It will include purchases and sales made during the worst quarter for the S&P 500 in more than two decades, when the index dropped almost 23 per cent.
In separate filings, Berkshire said it spent $9.45 billion on equity securities in the first nine months of last year, buying shares in companies including Eaton Corporation, a Cleveland-based maker of circuit breakers and fuel pumps; Ingersoll-Rand Co., a refrigeration-equipment manufacturer incorporated in Bermuda; and US Bancorp in Minneapolis.
