1973-1975: A 56% Decline – "It's Time to Invest"

In the early 1970s, the U.S. stock market experienced a broad, sharp decline. Berkshire Hathaway Inc. Class A(BRK.A.US) 's stock price fell from over $90 per share in 1973 to around $40 per share by October 1975—a drop of 56%.

By 1974, the U.S. stock market was trading at very low levels, with nearly every company's price-to-earnings ratio in the single digits. This was a rare period on Wall Street: American businesses were being abandoned, no one wanted to hold stocks anymore, and everyone was selling.

During this time, Berkshire's own stock price also suffered a severe decline. Faced with this drawdown, Buffett said in an interview with Forbes:

"I feel like a highly sexed man in a harem. This is the time to invest."

As Buffett pointed out in his 1974 letter to shareholders, Berkshire's insurance companies had overly concentrated their investments in common stocks in 1973, resulting in a paper loss of over $12 million by year-end. Regarding this, he stated, "But we believe that our common stock portfolio is worth its intrinsic value. Despite the significant unrealized loss at year-end, this portfolio will yield satisfactory returns over the longer term."

One of Buffett's most famous investment cases, The Washington Post, occurred during this period.

In 1973, Buffett invested $10 million to buy shares of The Washington Post at $5.63 per share. In Buffett's view, this was an incredible price—less than a quarter of its intrinsic value at the time.

Although the market continued to fall over the next two years, dragging down The Washington Post's stock price further, Buffett was unconcerned. He wrote in his shareholder letter:

"In 1973-1974, The Washington Post continued to perform well, increasing its intrinsic value. Nevertheless, the market value of our holding decreased by 25% from our original cost of over $10 million to $8 million. We thought it was cheap enough already, but a year later, the market marked it down another 20%."

When Buffett bought, he believed The Washington Post was priced at less than a quarter of its intrinsic value. As it turned out, this investment yielded far more than a fourfold return.

The Dot-com Bubble: A Drop of Over 50%, Eight Acquisitions in One Go

In the late 1990s, the United States experienced a dot-com bubble. As the market rallied for stocks related to the new economy, stocks of companies that were not part of the new economy were abandoned. Warren Buffett refused to buy dot-com stocks, and Berkshire Hathaway's stock price plummeted from over $80,000 per share to around $40,000 per share, a drop of more than 50%.

In the summer of 1999, Time magazine openly shamed Buffett on its cover: "Warren, What's Wrong?"

It was also in this year that Buffett delivered his famous Sun Valley speech.

"When it comes to investing, there are only two real questions:

First, how much return do you want?

Second, when do you want to get that return?"

Buffett told a story about an oil explorer:

"An oil explorer died and went to heaven. St. Peter said to him, 'You meet all the criteria, but here we group people together, and the oil explorers' area is full. I have no room for you.' The businessman asked, 'Do you mind if I say five words?'
'Go ahead.' So the businessman cupped his hands around his mouth and shouted, 'Oil has been discovered in hell!'
All the oil explorers rushed straight down, emptying the place.
St. Peter said, 'Alright, now this place is all yours.' The businessman paused for a moment and said, 'Oh, no, I think I'll go with them to hell. After all, there must be some truth to the rumor.'"

"That's how people perceive stocks. They easily believe rumors are true."

Buffett said there is no new paradigm. The ultimate price in the stock market only reflects economic output.

Although Buffett delivered this classic speech, Mr. Market didn't oblige. Tech stocks continued to boom, with the S&P 500 rising 21% and the NASDAQ surging 66% in 1999.

Correspondingly, Berkshire's per-share market value fell nearly 20%, its second-worst performance since 1990, drawing criticism from analysts and the media.

But the reversal came quickly. In March 2000, the internet bubble began to burst and crash, fully receding by 2001.

In his 2000 letter to shareholders, Buffett said, "Last year, we completed eight acquisitions in one go; two of these had been under discussion since 1999. The total amount for these deals was $8 billion, all paid with our own funds, without borrowing a single cent."

The 2008 Financial Crisis: A 56% Drop – "I'm Buying American"

During the 2008 financial crisis, Berkshire Hathaway's stock price fell from $99,800 per share in December 2007 to $44,820 per share on July 15, 2009—a drop of 56%.

When the market was engulfed in pessimism, Buffett published his famous article in The New York Times in October 2008: "Buy American. I Am."

In it, he reiterated his classic line: "Be fearful when others are greedy, and be greedy when others are fearful."

In the article, Buffett directly concluded: "Over the next decade, the return from investing in stocks will almost certainly be higher than that from holding cash, and likely significantly so.

Those investors clinging to cash are betting that they can efficiently time their shift from cash to stocks.

They're waiting for good news that makes them feel good, but they forget the advice of hockey star Wayne Gretzky:
'I skate to where the puck is going to be, not where it has been.'"

"I don't want to opine on the stock market, and I'll emphasize again that I have no idea where the market will go in the short term. But I will follow the advice from a restaurant ad in a empty bank building:

'Put your money where your mouth is.'

Today, my money and my mouth are in stocks."

In the month leading up to the publication of this article, Buffett made six separate moves, buying large amounts of shares in multiple companies.

Of course, Buffett emphasized at the time: "I can't predict the short-term movements of the stock market. If you ask me where the market will be in a month or a year, I have no idea. But one thing is certain: the market will rise significantly before the economy and market confidence truly recover. So, if you wait for the robins to signal spring, spring will almost be over."

Five months after this article was published, the U.S. stock market bottomed and rebounded, ushering in a bull market that lasted over a decade.

Thus, after the 2008 subprime mortgage crisis, people were amazed to find that Buffett had earned over $10 billion from the crisis, a 40% return, far exceeding the 12% return the U.S. government achieved from bailing out troubled companies.