Buffett happy to let others take Nasdaq risk

Hands off Bill Gates, says the investment guru who doesn't credit New Economy valuations
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The Independent Online

Warren Buffett, the American investor, has defended his decision to avoid investing in technology stocks and said he won't be changing his mind after the recent falls in Nasdaq.

Speaking at the annual meeting of his Berkshire Hathaway investment fund in Omaha, Nebraska at the weekend, Mr Buffett used the recent troubles of George Soros to underline the risks of hi-tech investing.

Mr Buffett, known as the "Sage of Omaha" for his ability to read markets, said that 30 years ago his Berkshire Hathaway fund was structured along similar lines to the Soros funds, but that there was now no comparison between them. "We don't consider ourselves in remotely the same business," Mr Buffett told about 8,000 shareholders, many of whom had travelled across America to hear his pearls of investment wisdom.

The comments came days after George Soros announced radical overhauls to his Quantum and Quota hedge funds after big bets on technology stocks and the euro turned sour. Berkshire Hathaway's performance has suffered in the past year after deciding not to join the internet bandwagon.

Charlie Munger, Mr Buffett's right-hand man and Berkshire Hathaway vice-chairman, expanded on the Soros contrast, saying: "In the end, Soros wasn't comfortable watching others make money in technology stocks. If we don't understand something, we're perfectly willing to let it rage on with lots of people making lots of money - while we don't."

Mr Munger was speaking in response to a shareholder in the six-hour question-and-answer session that followed the company's five-minute annual meeting. Shareholders queued from 7am to gain entrance to the civic centre in Omaha. Mr Buffett worked the crowd, surrounded by three bodyguards, shaking hands and posing for photographs.

Berkshire Hathaway's reluctance to invest in technology shares cost it dear last year, when it posted its worst performance ever relative to the Standard & Poor's 500 index. Profits last year fell by 45 per cent on losses at its insurance business. The company's shares fell by 20 per cent, following falls in the shares of Coca-Cola and Gillette, two of its biggest equity holdings.

One investor who said he lost money in Berkshire last year said he more than made it up by doubling his money in technology shares. He implored Mr Buffett to consider dedicating 10 per cent of Berkshire's capital to technology shares, which he called "the only game in town".

Mr Buffett responded: "We will never buy anything we don't understand. You got business cards on you, hand them out at the break. We have a man who has done very well, those who want can invest with him."

The investor compared the surge in internet stocks to other manias, such as the tripling of prices for farmland in Nebraska in the 1980s. "Any time there have been real bursts of speculation in the market, it does correct eventually. Looking back, you will see this as an era of enormous wealth transfer, but investors as a whole will gain nothing. It's the same principle as a chain letter."

So far this year Berkshire's shares have risen by 5.7 per cent, while the Standard & Poor's 500 index has declined by 1.14 per cent.

Mr Buffett dismissed rumours that he would step down to make way for Louis Simpson, 63, the head of the firm's motor insurance division.