FOCUS-Berkshire Hathaway 1999 profits tumble
(Recasts lead, adds detail throughout)
By Emily Kaiser
CHICAGO, March 11 (Reuters) - Berkshire Hathaway Inc. (NYSE:BRKa - news)(NYSE:BRKb - news), the holding company run by billionaire investor Warren Buffett, said on Saturday its 1999 profits fell 45 percent as losses at its insurance units contributed to what Buffett called the worst year of his tenure.
Omaha, Neb.-based Berkshire Hathaway, whose diverse holdings include Dairy Queen ice cream stores and auto insurer GEICO Corp., said 1999 net earnings dropped to $1.557 billion, or $1,025 per share, from $2.830 billion, or $2,262 per share in 1998. Net earnings include realised investment gains.
In a letter to shareholders posted on the Berkshire Hathaway Web site, (http://www.berkshirehathaway.com) Buffett blamed himself for the weak performance.
``We had the worst absolute performance of my tenure and, compared to the S&P, the worst relative performance as well,' Buffett said in a letter to shareholders posted on the web site on Saturday morning.
``Even Inspector Clouseau could find last year's guilty party -- your chairman,' Buffett said, referring to the detective figure made famous by the late Peter Sellers in the Pink Panther movies.
Berkshire Hathaway said it may consider share repurchases if its battered stock price remains depressed, but would most likely stick to private transactions.
``If we do find that repurchases make sense, we will only rarely place bids on the New York Stock Exchange,' Buffett said. ``Instead, we will respond to offers made directly to us at or below the NYSE bid.'
``We will never make purchases with the intention of stemming a decline in Berkshire's price,' Buffett said. ``Rather we will make them if and when we believe that they represent an attractive use of the company's money. At best, repurchases are likely to have only a very minor effect on the future rate of gain in our stock's intrinsic value.'
OLD ECONOMY SHARES HIT HATHAWAY PERFORMANCE
Class A Berkshire Hathaway shares closed Friday at $41,300 -- the lowest level since May 1997. Long revered for his stock picking prowess, the ``Oracle of Omaha' has seen Berkshire's stock tumble while shares in technology companies soared.
The stock has been hurt by a weak showing in Berkshire's equity holdings and investors' concerns that it represents ``old economy' stocks rather than flashier technology companies.
The stock also took a hit last month when rumours surfaced in an Internet chat room that Buffett was ill. Berkshire Hathaway denied the rumours. Buffett, 69, made no mention of his health in the letter to shareholders.
Buffett has shunned investing in tech companies, saying he does not know how to pick the ones with good long-term investment prospects. He also said investors ``seem wildly optimistic in their expectations about future returns' and predicted a ``severe' stock market correction when investors' expectations become more realistic.
Berkshire's 1999 profits were hit hard by poor results at its insurance companies, which include GEICO and General Re, and Buffett said he did not expect underwriting earnings to improve dramatically in 2000.
Berkshire's core equity holdings, which include large stakes in Coca-Cola Co. (NYSE:KO - news) and Gillette Co. (NYSE:G - news), also suffered in 1999 as shares in those companies sagged. Buffett said he remained committed to the companies and made no major changes to the Berkshire portfolio.
However, Berkshire did not list Walt Disney Co. (NYSE:DIS - news) among its top holdings for 1999, which indicates that it sold shares in the company last year.
``We still like these businesses and are content to have major investments in them,' Buffett said. ``But their stumbles damaged our performance last year, and it's no sure thing that they will quickly regain their stride.'
Despite the weak showing in 1999, Buffett said he expected Berkshire's returns to ``modestly exceed' that of the S&P 500 Index over the next decade, although he added that he did not expect the index to perform as well over the next decade or two as it has since 1982.
``We can't guarantee that, or course,' Buffett said. ``But we are willing to back our conviction with our money. To repeat a fact you've heard before, well over 99 percent of my net worth resides in Berkshire. Neither my wife nor I have ever sold a share of Berkshire and -- unless our checks stop clearing -- we have no intention of doing so.' |
