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Tue, Mar 09, 2004 - Page 12 News List

Buffett buys currencies, holds junk

INVESTMENT TIPS The world's second richest person said he saw few bargains in stocks but would hold onto his junk bonds and had been speculating on currencies


Warren Buffett, with cash piling up at Berkshire Hathaway Inc, said he invested US$12 billion in currencies, held onto most of his high-yield, high-risk bonds and regretted not selling some of Berkshire's stock holdings.

Buffett, 73, Berkshire's chairman and the world's second-richest man, told shareholders in his annual letter that he saw few bargains in stocks and bonds. Cash at the Omaha, Nebraska-based company jumped to US$36 billion from US$31 billion in September, and was earning "pathetically low interest."

"It's a painful condition to be in -- but not as painful as doing something stupid," Buffett said.

The dilemma so far hasn't prevented Buffett from increasing Berkshire's book value by an average of 22 percent a year during the past four decades. The company reported Saturday that fourth-quarter net income doubled to US$2.39 billion, or US$1,553 per Class A share, on a rebound in insurance units. Buffett said the company needs acquisitions to keep growing.

The foreign exchange purchases, made in five different currencies, represented Buffett's biggest investment in the last two years. Buffett said he started betting against the dollar in 2002 on concern that the US trade deficit would erode the value of the country's currency. The dollar has dropped 11 percent against the euro in the past 12 months.

Shares of Berkshire, which owns energy, aviation, paint and carpet companies, increased 44 percent in the past year. They rose US$1,000 to US$93,000 in New York Stock Exchange composite trading Friday.

Investors scrutinize Buffett's letters, which accompany year-end results, in an effort to emulate his performance.

Last year, Buffett said Berk-shire bought US$8 billion of high-yield, high-risk, or junk, bonds. Though price increases halted his bond purchases last year, Berkshire retained most of its holdings, Buffett said in Saturday's letter.

Buffett, who tends to buy and hold investments, said he missed an opportunity to dispose of some of Berkshire's stocks when markets soared in the late 1990s.

"I made a big mistake in not selling several of our larger holdings during `The Great Bubble,'" Buffett said. "If these stocks are fully priced now, you may wonder what I was thinking four years ago when their intrinsic value was lower and their prices far higher. So do I."

Berkshire is the biggest shareholder of Atlanta-based Coca- Cola Co, New York-based American Express Co and Gillette Co, based in Boston. He didn't specify which stocks he regrets not selling. Coca-Cola shares have fallen 43 percent from their peak in 1998, while American Express shares are down 16 percent.

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