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Has Warren Buffett Lost His Magic Touch?

Posted Aug 28, 2008 09:26am EDT by Aaron Task in Investing, Newsmakers, Banking

Warren Buffett is justifiably lionized by investors and mainly fawned over by the press. But beneath the fanfare, some critics say the "Oracle of Omaha" has lost his magic touch, and point to the recent slide in Berkshire Hathaway's stock as evidence.

The short case against Buffett, or more specifically Berkshire shares, rests largely on the following:

  • Berkshire's stock is too linked to the cult of Buffett, who is irreplaceable and approaching 80 years old. "Should he decide to begin to delegate responsibilities (sooner than later), it can be expected that many long-term investors in Berkshire will likely consider cashing out," noted short-seller Doug Kass opined earlier this year.
  • Berkshire is over-exposed to the housing market, via its holdings in Clayton Homes, Acme Brick, Nebraska Furniture, and others.
  • Berkshire is overexposed to financial via its holdings in Wells Fargo, US Bancorp, American Express, Bank of America, Moody's, and others.
  • Berkshire is saddled with the aftermath of both scandal and a bad derivatives portfolio at General Re, plus faces a generally less favorable insurance cycle for that and other insurance holdings.

But don't bet against Buffett or Berkshire stock, says James Altucher, managing director of formula capital and author of Trade Like Warren Buffett.

Altucher says Buffett's financial holdings are best poised to survive the current downturn and thrive when the cycle inevitably turns. The investor and author also has tremendous confidence in Buffett's ability to "reenergize his portfolio" and play demographic trends, in this case via holdings in healthcare names like Sanofi-Aventis and Glaxosmithkline.

Finally, Altucher notes that every time in history Berkshire shares have fallen more than 25% from a peak -- as they did in the recent peak-to-trough decline -- they have risen at least 37% in the ensuing 12 months.

Update: Altucher had no position in Berkshire shares when this interview was recorded.

85 Comments

SteveB
SteveB - Thursday August 28, 2008 09:49AM EDT

If buffett were busy analyzing economic and market trends rather than publicly opining on things he knows little about (like income taxes on the rich) his investment performance might improve.

Sherman
Sherman - Thursday August 28, 2008 09:51AM EDT

This is why Warren is a billionaire, and you're not. Small minds always have questioned greatness. 80 is the new 60, and Berkshire is a gimme. There is no better buy signal than when some idiot casts aspersion on WB.

Sherman
Sherman - Thursday August 28, 2008 09:51AM EDT

This is why Warren is a billionaire, and you're not. Small minds always have questioned greatness. 80 is the new 60, and Berkshire is a gimme. There is no better buy signal than when some idiot casts aspersion on WB.

Sherman
Sherman - Thursday August 28, 2008 09:52AM EDT

This is why Warren is a billionaire, and you're not. Small minds always have questioned greatness. 80 is the new 60, and Berkshire is a gimme. There is no better buy signal than when some idiot casts aspersion on WB.

Yahoo! Finance User
Yahoo! Finance User - Thursday August 28, 2008 09:52AM EDT

They said the same thing when Buffet passed on the dot-com boom.

Sherman
Sherman - Thursday August 28, 2008 09:53AM EDT

This is why Warren is a billionaire, and you're not. Small minds always have questioned greatness. 80 is the new 60, and Berkshire is a gimme. There is no better buy signal than when some idiot casts aspersion on WB.

joshnuckols
joshnuckols - Thursday August 28, 2008 09:54AM EDT

why does he need it anymore?

__A_YAHOO_USER__
__A_YAHOO_USER__ - Thursday August 28, 2008 10:00AM EDT

Warren Buffet is a good investor and his holding is okay.,......He is not a gamble but a long term strategist........US Bankcorp,American Express,Bank of America,Sanofi Aventis,Glaxosnithkline,All of them will recover do not think of six months or next 12 months....Think in the next 5 years to 10 years his holding still there and became so solid in 5 years time the most..In five years time all his holding willgive good return on dividend and goo capital appreciation or good capital income such as capital gain.Th point is we are too short sighted because of the current situation........My advice is follow his holdig now,make a carbon copy of his portfolio and you will not regret it in the long end....Pereverance is needed.

__A_YAHOO_USER__
__A_YAHOO_USER__ - Thursday August 28, 2008 10:00AM EDT

Warren Buffet is a good investor and his holding is okay.,......He is not a gamble but a long term strategist........US Bankcorp,American Express,Bank of America,Sanofi Aventis,Glaxosnithkline,All of them will recover do not think of six months or next 12 months....Think in the next 5 years to 10 years his holding still there and became so solid in 5 years time the most..In five years time all his holding willgive good return on dividend and goo capital appreciation or good capital income such as capital gain.Th point is we are too short sighted because of the current situation........My advice is follow his holdig now,make a carbon copy of his portfolio and you will not regret it in the long end....Pereverance is needed.

z32d630
z32d630 - Thursday August 28, 2008 10:03AM EDT

How can anyone take this guy seriously with that mop on his head? Dude, get a haircut and comb your hair... you look like you just got out of bed.

Yahoo! Finance User
Yahoo! Finance User - Thursday August 28, 2008 10:04AM EDT

hes the bests

__A_YAHOO_USER__
__A_YAHOO_USER__ - Thursday August 28, 2008 10:04AM EDT

Warrent Buffet Holding is a good bet..If you follow you will not regret it in five years time the most.Yes it was down today but in the end it will be the winner.

Mo
Mo - Thursday August 28, 2008 10:05AM EDT

Too much money but too little time to enjoy them... damn, I wish I have a such problem.

Neal Kluge
Neal Kluge - Thursday August 28, 2008 10:10AM EDT

Do NOT look at how much BRKa is down from the peak. That is meaningless. Look at where the Book Value is. And How much it has climbed the last year, last 5 yrs., last 10 yrs... Page 1 of this document says it all: ( at least far better than how much it is down from the peak) http://www.berkshirehathaway.com/letters/2007ltr.pdf

Cancerhead
Cancerhead - Thursday August 28, 2008 10:15AM EDT

Personally, I think Charlie Munger is the brains behind the Operation. Buffett Seems to linger aroung Munger. CancerHeads!

Burt
Burt - Thursday August 28, 2008 10:15AM EDT

One or two years from now this article will look pretty stupid. That is the beauty of the internet. It is a far less permanant record than newsprint. People quickly forget what is read off the internet.

BILLY BALL
BILLY BALL - Thursday August 28, 2008 10:17AM EDT

NOBODY BATS A 1000.AT THE END OF THE YEAR BUFFETT WILL STILL BE THE BATTING CHAMP.

Radhakrishna
Radhakrishna - Thursday August 28, 2008 10:18AM EDT

How dumb! If he were to swap the holdings like most of the short term investment managers do, imagine where we would have been. Housing and financials are bound to come back, and guess who will be the winner? WARREN BUFFET. Think fundamentally, Long Term!

jeff c
jeff c - Thursday August 28, 2008 10:19AM EDT

sounds like what I heard in 1999

valueman
valueman - Thursday August 28, 2008 10:23AM EDT

I always chuckle when anyone says criticizes Warren. When you become the greatest capital allocator the world has ever seen, then perhaps I'll take your criticism as poignant. Please, have some respect. The man is entirely self made. Now, let's see you go do it.

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