A bruised Warren Buffett looks ahead

By Jonathan Stempel

NEW YORK (Reuters) - Warren Buffett has some explaining to do.

Berkshire Hathaway Inc (BRKa.N) (BRKb.N), his insurance and investment company, is in the midst of one of its worst stretches since Buffett took over the company in 1965.

Berkshire's shares have lost close to half their value since December 2007. Investment losses have piled up as stock markets tumble. And tens of billions of dollars are at risk on derivative contracts that depend on stocks rising. For now, they are not.

All this makes Buffett's annual letter to Berkshire shareholders, to be released on Saturday, one of the most eagerly awaited in the career of the 78-year-old billionaire, the second-richest American according to Forbes magazine.

"It will be interesting to see if Buffett himself has learned lessons he might not have learned in his long career," said Bill Bergman, a senior equity analyst at Morningstar Inc and former economist at the Federal Reserve Bank of Chicago.

Buffett is likely to expound on the global economic turmoil and the foibles -- or worse -- of the copiously paid bankers, hedge fund managers and traders who helped create it.

He may also toss in a few loopy asides, such as his 2005 applause for second-in-command Charlie Munger's latent expertise in women's intimate apparel. Munger was 81 at the time; he is 85 now. Berkshire owns Fruit of the Loom.

But investors will also look for signs that Berkshire is primed for a turnaround, whether under Buffett or under his as-yet unnamed successors to become the Omaha, Nebraska company's chief executive and chief investment officer.