Morningstar has an answer for anyone asking if Warren Buffett has lost his touch.
While acknowledging the choice may be a "tad controversial" right now, the investment research firm has named Warren Buffett its 2008 CEO of the Year.
Morningstar StockInvestor editor Paul Larson recounts Buffett's "perceived mistakes" of recent months, including Berkshire's big put option contracts on stocks, investments in General Electric and Goldman Sachs, and Buffett's October call to buy U.S. stocks. "With the market taking a sharp turn for the worse in late October and again in November, clearly the timing was not the best on these particular bullish actions."
But, writes Larson, "We do not view these as any reason to lose confidence in Buffett's abilities, either as an investor or corporate manager."
He argues that worries about the option contracts are overblownand points out that even though the GE and Goldman warrants are underwater right now, Berkshire gets a 10 percent annual return on its $8 billion worth of preferred shares in the two companies, no matter what their common stocks do.
And, "if one still believes that Buffett has lost his edge, witness what value was recently created in Berkshire's dealings with Constellation Energy."
Larson praises Buffett's ability to steer Berkshire away from risky derivatives and excessive leverage. "By practicing prudence and patience earlier in the decade, Berkshire was in a position to put large amounts of capital to work in 2008. In other words, rather than blowing its ammunition hunting squirrels a few years ago, Berkshire has been able to shoot the proverbial elephants now walking by."
Morningstar's bottom line:
"Beyond creating a company that treats common shareholders with the utmost fairness and respect, one needs only to look at the long-term value created at Berkshire Hathaway to see why Buffett deserves the award. Since taking the helm of the sleepy textile business 44 years ago and turning it into arguably the strongest conglomerate on the planet, Buffett and his managers have grown the book value per A share from $19 to just over $77,500, as of Sept. 30. This translates to a 20.7% annualized increase in book value since 1965, versus a mere 9.6% annualized return in the S&P 500 (including dividends) over the same time period."
Larson appeared on CNBC this morning. That video clip appears above. He also did a video clip for Morningstar.com with senior stock analyst Bill Bergman. It's embedded here:
Current Berkshire stock prices:
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