Buffett Bests Geithner On Goldman Investment

I hope Tim Geithner isn’t letting his ego run away with him over the return that he made on the government’s Goldman stake. It’s chump change compared to what Warren Buffett made on his investment.

From the NYT:

Mr. Buffett’s stake in Goldman is now worth $9.1 billion, or about $4.1 billion more than what he paid 10 months ago, according to an analysis by Linus Wilson, an assistant professor of finance at the University of Louisiana at Lafayette.

According to Mr. Wilson’s calculations, Mr. Buffett would realize an annualized return of 111 percent if he sold his Goldman stake, which is held by his conglomerate Berkshire Hathaway.

In comparison, the federal government received a 23 percent annualized return for its Goldman investment.

You think we might have left a little on the table?

While we’re speaking of Buffett, John Hempton at Bronte Capital has an interesting take on his investment strategies:

Warren Buffett may – at least in part to make management comfortable – state regularly that his favourite holding period for a stock is forever. And he is a darn good buyer of shares. His name is used to promote “buy and hold”.

What is less well recognised is that he is a fantastic seller. In 2000 he disposed of very large shareholdings in Fannie Mae and Freddie Mac. The stocks nearly doubled after he sold them – so for a while it looked like his timing was awry.

Why am I writing today? Because Warren is selling his stake in the Moodys rating agency. It looks like he is rather late. The franchise has already been seriously impaired. Moodys gave its blessed AAA to lots of things that defaulted. Indeed it seems the Moodys AAA is cursed.

Still plenty of people think that there will be a role for rating agencies – and that Moodys end position – backed by regulation – is solid.

Be warned. Buffett is a very canny buyer of equities. He is even more canny a seller.

A lot of people have been taking shots at Buffet lately. Berkshire Hathaway has taken its lumps and some have questioned the investments he’s made in a super buyers market. It might be a little soon to count out the old codger.

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