Buffett's Big Bets Trail Indexes in 2009

Warren Buffett made some shrewd moves like buying Goldman Sachs' preferred stock in 2009, but Berkshire Hathaway's biggest holdings are trailing the market's best as 2009 draws to a close.
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OMAHA, Neb. (

TheStreet

) -- It was not the finest of years for Warren Buffett -- indeed, the top ten

Berkshire Hathway

(BRK.B) - Get Report

holdings have significantly trailed the best S&P index returns in 2009, according to data as of the last week of December.

Most of the Berkshire top ten finished the year ahead of share prices on Dec. 31, 2008 -- with the exception of

Wells Fargo

(WFC) - Get Report

.

Still, gains made by Warren Buffet's biggest portfolio holdings were relatively small when compared to the best performing stock sectors in 2009. The broad recovery throughout the U.S. economy in the second half of 2009 was reflected to a much-lesser extent in Buffett's biggest bets.

The best-performing stock sectors in 2009 were led by the S&P 500 Healthcare Facilities Index, which was up more than 380% through Dec. 23. The S&P 500 Automobile Manufacturers Index was up 232% through Dec. 23. The S&P 500 Real Estate Services (219%) and Dividend Metals & Minerals (217%) indexes were also both up more than 200% in 2009.

Buffett has always made it clear there are certain sectors he just won't play in as he doesn't understand them -- the Internet sector most notable among the Buffett-mystifiers. And in 2009, the stocks Buffett does understand couldn't touch the Internet. The S&P 500 Internet Retail Index was the fifth-best performing sector in 2009, up 183% through Dec. 23.

Even the best-performing of Berkshire Hathaway's top ten significantly trailed the returns of the fifth-best sector performance, S&P 500 Internet Retail.

American Express

(AXP) - Get Report

, of which Berkshire Hathaway owns 13%, was up more than 120% in 2009, from $18.55 on Dec. 31, 2008, to $41.70 on Dec. 28, 2009.

Among financial stocks, it was a mixed bag for Berkshire Hathaway in 2009, as the gains made by American Express were offset by the continued slump at

Wells Fargo

(WFC) - Get Report

. Buffett owns close to 7% of Wells Fargo, which declined from $29.48 at the beginning of 2009, to $26.91 on Dec. 28, 2009.

Kraft

(SYMBOL)

, of which Berkshire Hathaway owns 9%, inched out minor gains in 2009, from a Dec. 31, 2008 share price of $26.85, to $27.36 on Monday.

Gains made by

Coca-Cola

(KO) - Get Report

, of which Buffett also owns approximately 9%, were at the level of the broad market. Coca-Cola shares rose from $45.27 at the outset of 2009 to $57.40 on Dec. 28, or a gain of roughly 21%, on par with the S&P 500 Index 2009 returns.

Berkshire Hathaway's biggest holding,

Wesco Financial

(WSC) - Get Report

, rose from $288 to $343 through Dec. 28. Berkshire owns 80% of Wesco.

Burlington Northern

(BNI)

, increased from $75.70 to $98.40 after Buffett announced the premium he was paying for the railroad shares. Berkshire owned 22% of Burlington Northern ahead of the proposed complete takeover.

The

Washington Post

(WPO)

, of which Buffett owns 18%, rose from $390 to $445 by Dec. 28, or a gain of 12%, still well short of the broad market.

Moody's

(MCO) - Get Report

, in which Berkshire Hathaway has been decreasing its 13.5% stake, gained from $20.00 to $27.47 by Dec. 28. Still, the 2009 gain of 27% for Moody's was nowhere near the best S&P sector gains in 2009. What's more, the fact that Buffett was decreasing his Moody's stake throughout 2009, while big holdings like Kraft and Coca-Cola trailed the markets, did not help the return profile of Berkshire's biggest bets.

Paul Howard, an analyst with

Janney Montgomery Scott's

Langen McAlenney division, said while the biggest Berkshire Hathaway bets clearly were not aligned with the best-performing stock sectors in 2009 -- and, in fact, significantly lagged for the most part -- Buffett did make some great investments in 2009 that should perform well over time. Howard pointed to the deals Buffett struck for preferred shares in

Goldman Sachs

(GS) - Get Report

and

General Electric

(GE) - Get Report

.

Howard noted that the Goldman investment has already proven a "home run" and, especially in a low-yield environment like the current one, both financial sector investments should perform well over time.

-- Reported by Eric Rosenbaum in New York.

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