On Nov 5 2009 12:20 AM, Howard Beale wrote:
Here's a little blurb from Casey's Daily Dispatch by Chris Wood:
Own Berkshire Hathaway for Under $70
Yesterday, Warren Buffett’s Berkshire Hathaway announced plans for a
50-for-1 stock split of its Class B shares to facilitate the company’s $26
billion cash-and-stock purchase of the remaining 77% of rail operator
Burlington Northern Santa Fe Corp. it currently doesn’t own. Given that
the B shares are currently trading just north of $3,400, the post-split
price would be about $68.
Here’s more of the story from The Wall Street Journal:
Such a price change would make a big difference for retail investors
who want in on Berkshire shares. Even the Class B shares, which were
created in 1996 and are structured to cost about 1/30th the price of Class
A shares, are out of reach for most.
"In most situations, investment bankers will say it's important to
find a stock more people can buy a hundred shares of," said Nicholas
Colas, chief market strategist for BNY ConvergEx Group. "A lower priced
stock just allows more investors to consider the asset."
Given Mr. Buffett's track record and public stature, many investors
want exposure to his business and stock-picking acumen. The ability to
attend his annual investor meeting in Omaha, Neb., which has taken on cult
status, provides no small allure as well.
The inclusion of Berkshire on a major stock index would broaden its
investor base even further.
Standard & Poor's has eight major criteria to be included in its
bellwether index S&P 500 Index, which has about $1 trillion directly tied
to it. Berkshire has met some of the criteria for years, including market
capitalization rules and a mandate all companies must be U.S. based.
One criteria has been an issue, however, with S&P guidelines stating
that any constituent must trade a minimum of 250,000 shares in each of the
six months leading up to the evaluation date. Berkshire's class B shares
have recently pushed to around 30,000 shares a day after being much lower
last year. So, while they now surpass the 250,000-share full-month
threshold, the stock split will have them easily meeting the benchmark.
One issue that may leave Berkshire on the outside is its reliance on
Mr. Buffett. Index experts say the S&P 500 committee wants companies that
are unlikely to face the kind of upheaval that could be created when
someone of Mr. Buffett's stature leaves.
"It's a question of leadership. If Steve Jobs is critical to Apple,
Warren is 10 times more critical to Berkshire Hathaway," said Mr. Colas,
noting Mr. Buffett's advanced age.
A spokesman for S&P declined to comment about Berkshire's potential
inclusion in its indexes, noting any statements from S&P could be market
moving.
For the record, I’m a little leery about investing in Berkshire Hathaway
these days. If the data I found from Barron’s is accurate, the stock, at
more than 50 times earnings, seems overvalued. Plus, the sage of Omaha has
seemed a little off his game the past couple years, and I don’t
particularly like the collectivist rhetoric that spews from his mouth from
time to time.
Nevertheless, a more successful value investor there has never been, and
picking up the shares below $70 is really tempting. I’ll let you know what
I decide.
Chris Wood
The ability to attend the shareholders annual meeting in Omaha Nebraska
seems like something really cool.
Gary (sold all my shares in BNSF a year ago) Philips
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