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Berkshire Hathaway Rebounds in 2009

Updated from 12:04 p.m. EST

Update includes Berkshire stock performance during 2009 and information on its investment portfolio.

OMAHA, Neb. ( TheStreet) -- Warren Buffett's Berkshire Hathaway (BRK.A - Get Report) saw its annual performance improve significantly in 2009.

In his annual letter to shareholders released Saturday, Buffett said Berkshire's per-share book value -- which the company uses as a key performance yardstick -- increased 19.8% in 2009 to $84,487. In 2008, the company's per-share book value declined 9.6%.

Despite the recovery in 2009, Berkshire said its performance still trailed the 26.5% return for S&P 500 including dividends. It was only the seventh time since 1965 that Berkshire's per-share book value lagged the stock index.

Berkshire's Class A shares underperformed the S&P 500 by a broader margin, gaining only 2.7% during 2009 to end the year at $99,200. They finished Friday at $119,800.

In addition to its operating businesses, Berkshire holds a large portfolio of common stocks of other companies. These stocks had a total value of $59.03 billion at the end of the year.

One relatively recent investment -- the 2008 purchase of a $232 million stake in Chinese car and battery maker BYD Co. -- has logged a handsome return. At the end of 2009, the stake was worth $1.99 billion.

As for its operating businesses, Buffett said the company's property-casualty and life insurance units, which include GEICO, had an underwriting profit of $1.56 billion in 2009 vs. $2.79 billion for 2008. The businesses' year-end float was $61.91 billion for 2009 vs. $58.49 billion for 2008.

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Buffett said that in 2009 Berkshire "closed the book on a very expensive business fiasco" for which he took responsibility: a GEICO credit card.

Buffett wrote that he had thought applicants for the card would be the "cream" of GEICO's customers but added that they turned out to be the "non-cream."

Pretax losses from credit-card operations came to about $6.3 million before he decided to close the business by selling the $98 million portfolio of receivables for 55 cents on the dollar, causing an additional loss of $44 million.

Elsewhere, net income from the company's manufacturing, service and retail businesses totaled $1.11 billion in 2009, down from $2.28 billion in 2008.

"Almost all of the many and widely-diverse operations in this sector suffered to one degree or another from 2009's severe recession," Buffett wrote. "The major exception was McLane, our distributor of groceries, confections and nonfood items to thousands of retail outlets, the largest by far Wal-Mart (WMT)."

McLane recorded pretax earnings of $344 million for 2009.

In his discussion of Berkshire's Clayton Homes business, which makes modular and manufactured homes, Buffett wrote that the low number of U.S. housing starts in 2009 was actually good news for the housing market in the long run.

"Within a year or so residential housing problems should largely be behind us, the exceptions being only high-value houses and those in certain localities where overbuilding was particularly egregious," he wrote. "Prices will remain far below 'bubble' levels, of course, but for every seller (or lender) hurt by this there will be a buyer who benefits."

-- Written by a member of staff.
This article was written by a staff member of

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