S-H-O-C-K-I-N-G: Berkshire Stock Portfolio Below Cost Basis

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I just came across a shocking post from Jeff Mathews on Berkshire’s equity portfolio: “This Just In: Berkshire Equity Portfolio Back To Its Cost Basis”, Saturday February 28.

In that post, Mathews says that Berkshire’s equity portfolio, which had a cost basis of $37.1 billion and year end 2008 value of $49.1 billion had surrendered all of those capital gains as of the close Friday.  The argument is rock solid and so I decided to run the numbers myself.

I entered all of the holdings listed on p. 15 of Berkshire’s 2008 Annual Report into a spreadsheet including: stock ticker, shares, cost basis, 2008 year end market value and current market value (close Mon 3/2/09). 

Because Berkshire now owns more than 20% of Moody’s and Burlington Northern and therefore accounts for the holdings in a different way, I went back to the 2007 annual report and listed the data for year end 2007.  This is completely accurate for Moody’s as Buffett wrote in this year’s annual report that no shares have been added. 

He bought shares of Burlington Northern in 2008 and I am not able to track the capital gains/losses on those purchases.  With Burlington Northern shares down compared to 2008, Buffet has capital losses on his 2008 buys as well.

I also can’t account for the “Other” stock holdings which consist of stock holdings with a year end 2008 value less than $500 million.  Buffett almost certainly has losses on these holdings thus far in 2009 as well.

The cost basis for all of Berkshire’s equiy holdings, including Moody’s and Burlington Northern and excluding “Others”, is $36.3 billion.  The year end 2008 value was $49.8 billion – for unrealized capital gains of $13.5 billion.  As of the close yesterday, the value of these holdings was $33.7 billion – for unrealized capital losses of $2.6 billion.  

All of Berkshire Hathaway’s capital gains on its long term equity portfolio have been wiped out as of yesterday!

To give you an idea of the magnitude of these losses, Berkshire had unrealized capital gains $35.8 billion as of year end 2007.  So we are talking about losses here of $38.4 billion or 51.2% of the $75 billion value as of the end of 2007.

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