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Fri, Feb 23, 2001 EST
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Berkshire Hathaway Profits Fall 45 Percent
OMAHA, Neb — Berkshire Hathaway Inc., the holding company run by billionaire investor Warren Buffett, said on Saturday its 1999 profits fell 45 percent, hurt by weakness at its insurance units and a poor stock performance from several key holdings.

Berkshire Hathaway, whose diverse holdings include Dairy Queen ice cream stores and auto insurer GEICO Corp., said 1999 net earnings dropped to $1.557 billion, or $1,025 per share, from $2.830 billion, or $2,262 per share in 1998. Net earnings include realized investment gains.

In a letter to shareholders posted on the Berkshire Hathaway Web site (http://www.berkshirehathaway.com) Buffett said 1999 was the worst year of his tenure and blamed himself for the weak performance.

"We had the worse absolute performance of my tenure and, compared to the S&P;, the worst relative performance as well," Buffett said in the letter posted on Saturday morning.

"Even Inspector Clouseau could find last year's guilty party — your chairman," Buffett said, referring to the detective figure made famous by the late Peter Sellers.

Class A Berkshire Hathaway shares closed Friday at $41,300 — the lowest level since May 1997. Long revered for his stock picking prowess, the "Oracle of Omaha" has seen Berkshire's stock tumble while shares in technology companies soared.

Buffett has shunned investing in tech companies, saying he does not know how to pick the ones with good long-term investment prospects. He also said investors "seem wildly optimistic in their expectations about future returns" and predicted a "severe" stock market correction when investors' expectations become more realistic.

"Our problem — which we can't solve by studying up — is that we have no insights into which participants in the tech field possess a truly durable competitive advantage," Buffett said in the letter.

Berkshire's 1999 profits were hit hard by poor results at its insurance companies, which include GEICO and General Re, and Buffett said he did not expect underwriting earnings to improve dramatically in 2000.

Berkshire's core equity holdings, which include large stakes in Coca-Cola Co. and Gillette Co., also took a hit in 1999 as shares in those companies sagged. However, Buffett said he remained committed to those companies and made no major changes to the Berkshire portfolio.

"We still like these businesses and are content to have major investments in them," Buffett said. "But their stumbles damaged our performance last year, and it's no sure thing that they will quickly regain their stride."

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