Is This Keeping Warren Buffett Up at Night?

Warren Buffett Stock MarketBillionaire Warren Buffett Lost a Combined $1.2 Billion in His Top Holdings This Week

Warren Buffett may be known for making smart investments, but the past week has been tough for the billionaire investor. The Oracle of Omaha has lost a combined $1.2 billion on his holdings in Wal-Mart Stores Inc. (NYSE:WMT), Wells Fargo & Co (NYSE:WFC), and International Business Machines Corporation (NYSE:IBM).

Things began taking a turn for the worst with Wal-Mart, which predicted that its sales would remain flat for the rest of 2015, along with reductions in earnings per share. Quite predictably, Wal-Mart stock price dropped by over 10%, which resulted in approximately $360 million in losses for Berkshire Hathaway, Warren Buffett’s investment company. (Source: “Warren Buffett’s really bad week,” Forbes, October 22, 2015.)

Wells Fargo stock declined on the same day after reporting an extremely lackluster earnings growth figure of just one percent. (Source: Wells Fargo, last accessed October 23, 2015.) While the drop was altogether insignificant at $0.36, the 40 million shares of Wells Fargo stock held by Berkshire Hathaway amounted to more than $170 million in losses for Warren Buffett.

And then we have IBM stock, which the billionaire investor has been bullish on for years now. IBM reported third quarter earnings fell 14% year-over-year last week, which sent shares tumbling six percent. (Source: IBM, last accessed October 23, 2015.) While this seems like a recoverable position, Buffett’s Berkshire Hathaway lost over $680 million.

So, let’s recap: we’re talking about three stocks, one billionaire, and a very big personal financial loss. But just how serious is this for Warren Buffett?

Of course, this certainly isn’t the end of the world for Buffett or Berkshire Hathaway, which holds total assets in the range of $115 billion in its portfolio. One might even be tempted to say that a loss of $1.2 billion, which is about one percent of the portfolio’s value, is a drop in the bucket.

There’s a long list of people who bet against Warren Buffett’s investments and failed, so a short drop in his overall portfolio is not necessarily cause for too much concern. Buffett has made a career out of gambling on businesses with very high brand value, which has usually led to his investing in businesses with good records of dominating their respective industries. But given all the economic volatility and broader financial market anxiety we are seeing as of late, investing in long-term holds in the way that Warren Buffett runs the risk of getting caught out of position.