Editor’s note: This article was first published in July 2010. It discusses Berkshire Hathaway’s results during the financial crisis, apparently fiscal 2008, and describes Buffett as 80 years old. He stepped down as CEO at the end of 2025.
Warren Buffett, chairman of Berkshire Hathaway, has been a model and an example to follow with his investments during this economic crisis. Even though he has just had his worst financial performance since he started out in 1965, Buffett offers us invaluable investment lessons.
His earnings have fallen 63% compared with previous years. Put like that, it sounds tragic, since he hasn’t managed to generate the same annual net profit as two years ago, which was roughly $15.5 billion. Even so, in his worst period he still made $5.1 billion by the end of the year, which isn’t bad either, even if some shareholders are a little upset.
If there’s one thing to highlight about this great, experienced 80-year-old investor, it’s how plainly he admits that everything is his fault. He hasn’t looked for anyone to blame, and he has apologized in writing to his shareholders for not paying enough attention to certain investments.
- He invested more than $220 million in Irish banks, whose share prices never stopped falling.
- He also made the mistake of investing in oil when its price was at its peak.
- He invested in the energy sector and, when share prices fell, decided to sell quickly and take some losses. Had he waited a few more weeks, he would have made a large profit. This is what he calls a beginner’s mistake.
For all these mistakes, Warren apologizes.
Warren Buffett’s smart investments
Since he started out, Buffett has had a very clear and well-defined strategy when it comes to investing in businesses. He loves investing in businesses, but he doesn’t like buying them outright or making management decisions. His preferred role is that of a minority partner.
This lets him be a partner and shareholder in hundreds of companies. According to Warren Buffett, it’s a very sound form of diversification.
What’s more, from the moment the housing bubble began, he took a very different view from other investors. While many investors put their money into financial derivatives and real estate expecting to make a fortune, he invested in insurance companies and building materials companies, but not directly in construction.
It’s one more example of how someone, in this case an investor, saw the construction crash coming. The crash hasn’t hit Buffett directly, although it has indirectly. That’s the difference between making losses and making smaller profits.
Further reading
