Warren Buffett conceded that his holding company, Berkshire Hathaway, turned in its worst performance on record as the financial crisis drew the world’s economy into a deepening recession, and gave investors little reason to believe a turnaround is imminent.
In his annual letter to Berkshire shareholders, Mr. Buffett recounted how frozen credit markets dovetailed with tumbling home and stock prices to imperil many of the world’s biggest banks and produce “a paralyzing fear that engulfed the country.” “By yearend,” he wrote, “investors of all stripes were bloodied and confused, much as if they were small birds that had strayed into a badminton game.”The billionaire also urged his legions of followers to remember that the stock market usually rises; the Standard & Poor’s 500 Index has produced annual increases in 75% of the past 44 years, and may do so again even if the downturn persists. “We’re certain, for example, that the economy will be in shambles throughout Y 2009, and, for that matter, probably well beyond.
But that conclusion does not tell us whether the stock market will rise or fall,” he wrote. Regardless, Mr. Buffett wrote, Berkshire will stick with a strategy that has produced an annual compounded growth in book value of 20.3%: maintaining its “Gibraltar-like” financial strength, improving the competitive position of its existing businesses and making new acquisitions that bolster earnings.
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