Berkshire Hathaway: Buy Of The Century

In the midst of Warren Buffett’s Berkshire Hathaway (BRK-A) reporting its worst year ever, -9.6%, the stock price has plummeted to a level not seen in almost 6 years.

Mr. Buffett’s usual “Warren-isms” were all at play in Saturday’s Annual Letter to Shareholders. At one point he disclosed there were mistakes he had made…

“Furthermore, I made some errors of omission, sucking my thumb when new facts came in that should have caused me to re-examine my thinking and promptly take action.”

When a legendary investor like Warren Buffett can make statements like that, it gives comfort to the rest of us “mere mortals.”

Now outsiders look at the return of 2008 will note that while the performance was the worst ever, it still ranks as the sixth best in comparison to the S&P 500’s (^GSPC) results. Buffett beat the index by 27.4%. Last time we checked, that’s not bad.

Yesterday, Class A shares of Berkshire closed at $75,750. This represents an incredible buying opportunity for anyone with funds on the sidelines - A rare chance to invest with the best. Here’s why.

What the annual reports and updates don’t detail is the amount of private companies they’ve purchased and large dollar loans they’ve negotiated with numerous companies. Berkshire has been able to receive terms and interest rates that would leave bondsmen drooling.

Look at the deal with Constellation Energy (CEG) as an example: Berkshire provided short term financing and a large loan for 50% of the company. After French Électricité de France (EDF.PA) came back and negotiated higher terms, Berkshire still received 14% interest on $1 billion in loans and a $175 million termination fee.

A 14% return is almost unheard of in this market. It’s the kind of deal that’s commonplace at Berkshire Hathaway, and the reason why it represents such a value right now.

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