"Richest man" Buffet admits "mistake" buying at $140 oil

Published Mar 2, 2009
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“The world’s richest man” said he made “an unforced error” when he bought loads of energy company stock in 2008 just as the price of oil was reaching its historic peak of $147 a barrel.

“Without urging from … anyone else, I bought a large amount of ConocoPhillips stock when oil and gas prices were near their peak,” Warren Buffet wrote to shareholders in his investment company Berkshire Hathaway.

In common with many a common investor, he admitted he “in no way” foresaw the dramatic fall in energy prices that occurred in second-half 2008.

“I still believe the odds are good that oil sells far higher in the future than the current $40 to $50 price,” he said, adding, “But so far I have been dead wrong.” He admitted the moves cost Berkshire “several billion dollars”.

His comments came as the company posted net earnings of $4.99 billion, down some 60 percent from the $13-billion highs of the prior year.

Holding company Berkshire Hathaway, which invests in property, insurance and finance as well as energy, looks set to focus on companies displaying good earnings going forward.

“We like buying underpriced securities, but we like buying fairly-priced operating businesses even more,” Buffet wrote.

His comments were echoed on television, Monday, when 3i communications boss, Patricke Dunne told CNBC his investment firm too was focused “not so much net-asset, but on earnings”. Like Hathaway, 3i — successor to the post-WWII Marshal Plan — is a big investor in energy companies.

Hathaway’s international MidAmerican Energy Holdings Co. helped bring in $14 billion in revenues, including over $100 million more in 2008 from pipelines, or up to $595 million.

Meanwhile, Buffet said shareholders attending Hathaway’s annual meeting in May would be able to peruse “clean-energy” technology, inculding a “green” home of solar-energy roofing and other energy savings.


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