When one talks about value investing, one of the first investors to come to mind is warren buffet, who has become a billionaire through his unique brand of investing that he has followed faithfully and consistently over many years. But his fortunes too have been adversely affected by the current economic downturn.

Buffett has recently invested $11.5 Billion worth in companies like GE, Goldman Sachs, Tiffany’s, Harley Davidson, and Swiss Re. Many of these investments have incurred him significant losses, at least for the short term. Berkshire Hathaway’s acquisition of 10% perpetual preferred stock of Goldman Sachs at $123, which then fell to below $60, was one of these. Another loss was his October 2008 purchase of GE preferred stock, priced in the mid 20’s. Since then GE has lost market capitalization and is currently trading below 10$. Warren buffet’s investments in Wells Fargo, American Express, Moody’s and U.S. Bancorp are all bringing him losses due to the underperformance of the financial sector. While his investments in derivatives, which he has previously criticized as being “weapons of financial mass destruction” have met with allegations of hypocrisy and $6.73 billion mark-to-market losses. Shares of Buffett’s insurance and investment company Berkshire Hathaway are currently trading at a price of under 85,000$ from a peak of $147,000, and it has also reported a 77% drop in earnings during Q3 2008. These losses and failures have brought criticism upon Buffett and his conglomerate Berkshire Hathaway, and has led some investors to question the effectiveness of his method of investing, which has many followers worldwide, in the current economic climate.

Do his principles, which have brought him (And others) much wealth still hold true? There is no definite answer. Buffett has, like many other investors suffered many losses and setbacks. However one has to keep in mind that Buffett has made major mistakes before, in investments such as Salomon Inc and US Air and still gone on to make untold profits. However, a distinction that analysts make between Buffett and others who follow his investment philosophies, is that Buffett has a ready flow of cash, huge amount of capital and gets special deals from companies due to his reputation. So while only time will tell if Buffett’s philosophies will work as in the past, the followers of his methods will have to be more careful than Buffett himself.

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