Buffett sorry for poor showing but will stick to his strategy

Billionaire apologizes to shareholders in his fund

March 12, 2000|By NEWSDAY

Bowed but far from broken, billionaire investor Warren Buffett warned yesterday of a long-term slump in stock prices while accepting blame for his Berkshire Hathaway conglomerate posting a poor performance amid the greatest bull market in history.

In his much-awaited annual statement to shareholders, released on the Internet, Buffett criticized himself for failing to allocate his capital wisely.

Yet the so-called "Oracle of Omaha" insisted that he and his vice chairman, Charlie Munger, will stick to their strategy of investing for the very long term in traditional companies and avoid buying shares in the type of technology businesses that have fueled much of the recent run-up in the Nasdaq stock index.

"Our lack of tech insights does not distress us at all," Buffett wrote.

Buffett, 69, said that ignorance prevents him from walking along the cutting edge. While technology will transform society, "our problem -- which we can't solve by studying up -- is that we have no insights into which participants in the tech field possess a truly durable competitive advantage."

He said Berkshire is not adding to or scaling back its existing holdings in such decidedly "old economy" businesses as insurance, furniture, retailing, candy and utilities. And he indicated a belief that "wildly optimistic" expectations by many investors looking to strike it rich in "new economy" dot-com stocks will be dashed.

It's a "virtual certainty" that the stock market will do "far less well in the next decade or two than it has since 1982," he said.

In its 1999 annual report, also released yesterday, Berkshire posted its worst performance vs. the Standard & Poor's 500 stock index -- flat vs. a 21 percent gain -- since Buffett, the world's third-richest person, took over the company in 1965.

Historically, a $10,000 investment after Buffett hit his last rough patch in 1975 would have netted $21 million by its 1998 high.

Since then, the value of that same investment has been cut by more than half, largely because of Buffett's refusal to go high-tech.

Berkshire also has been hurt by underwriting losses in its core insurance business, which Buffett characterized as "aberrational."

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