Buffett goes on $20 billion stock buying spree

NEW YORK (CNNMoney) -- In the worst quarter for U.S. stocks since the financial crisis, investor Warren Buffett went on a stock buying spree.

A filing late Friday from Buffett's Berkshire Hathaway (BRKA, Fortune 500) shows it bought $20 billion in stocks in the three months ended Sept. 30 -- including $6.9 billion worth of dabbling in U.S. stocks.

The purchases also included the $8.7 billion purchase of specialty chemical company Lubrizol Corp., which closed in the quarter after being announced earlier in the year, and $5 billion in preferred shares and warrants of Bank of America (BAC, Fortune 500).

The $6.9 billion in common stock purchases represented a fairly aggressive market position, said Greggory Warren, the analyst who follows Berkshire for Morningstar.

"That's a better jump than we've seen from them in a while," he said.

Berkshire bought about about $3.6 billion in stock in the second quarter and less than $1 billion in the first quarter. Given Buffett's inclination to try to find bargains, the buying in the third quarter wasn't a surprise, Warren said.

"We saw a fairly significant decline in the quarter," he said. "The question is where he put the money to work. We'll have to wait to find that out."

The blue chip Standard & Poor's 500 fell 14% in the third quarter, the biggest drop since the fiscal crisis hit markets in the final three months of 2008. Other major indexes also tumbled, driven by the downgrade of the U.S. debt rating, the uncertainty over the European sovereign debt and rising worries during the period that the U.S. economy is in danger of a new recession.

Buffett continued to be bullish on stocks in comments during the period. On Aug. 15, he told PBS interviewer Charlie Rose that on the first day of trading after the U.S. credit downgrade -- as the S&P 500 plunged nearly 7% -- Berkshire made its largest single-day stock purchases of the year to date. And he said the $7 billion Berkshire had invested to that point of the year was at least $1 billion more than it had ever purchased in a year.

"It's like buying on sale," he said in that interview.

Berkshire's earnings tumbled 24% in the quarter to $2.3 billion, hurt by the decline in value of its holdings and a $1.6 billion loss on derivatives it held during the period.

But Cliff Gallant, analyst with Keefe, Bruyette & Woods, said he believes most of the reported derivative losses have already been reversed by the rebound in stocks in October. He said the operating earnings beat forecasts.

"The strength of core operating earnings shrugged off mark-to-market paper losses in the derivatives book," he wrote in a note Monday. "With nearly $35 billion of cash on hand and as one of the highest credit worthy financial institutions in the world, we expect that Berkshire will continue to be positioned for such attractive opportunities."

Berkshire shares were down just less than 1% in midday trading Monday, but that was less than the drop in the broader markets.