We have talked about Buffet on this thread a lot of time over last few years, fwiw.. I am watching this thing and in my opinion this is for someone who believes in US economy.. brka and brkb.. ugly falling knife chart but worth a look above 1650..
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News of No News at Berkshire Hathaway
By Selena Maranjian (TMF Selena)
February 11, 2000
Shares of Warren Buffett's company, Berkshire Hathaway (NYSE: BRK.A), have been dropping steadily in value over most of the past year. Class B shares, which traded above $2,700 per stub within the last 52 weeks, are now not far from half of that, in the mid $1,500s. What's up? Well, a reason for this past week's slide may have been rumors floating around that Buffett was in failing health. Taking an unusual step, the company issued a brief press release yesterday. In its entirety, it said:
"Recently certain rumors have surfaced on the Internet regarding share repurchases and Mr. Buffett's health. While it has been a long-standing Berkshire policy to not comment on rumors, we are making an exception with respect to these recent rumors. All rumors regarding share repurchases and Mr. Buffett's health are 100% false. We encourage shareholders and others who are interested in obtaining information about Berkshire to visit our Web site (berkshirehathaway.com) where all press releases are posted concurrent with their release to the media."
The fact is that Buffett isn't exactly a spring chicken. And when he moves on to the great stock market in the sky, shares of Berkshire may rush south on the news -- at least for a while. Investors and possible investors need to keep a few things in mind regarding this:
1) He's not that old. Still in his 60s, he may well have a decade or two of investing left. He clearly loves what he does and will likely remain at his post as long as he can do the job.
2) He knows that he won't be around forever. He's explained that he has taken steps to arrange for a successor. There's a plan in place and he's got smart people working closely with him.
3) The company is much more than just Buffett. Remember that it encompasses many entire businesses (Geico, General Re, Flightsafety International, Dairy Queen, See's Candies, Borsheim's Jewelry, etc.) and holds considerable stock in companies such as American Express (NYSE: AXP), Washington Post Company (NYSE: WPO), Gillette (NYSE: G), Coca-Cola (NYSE: KO), and Walt Disney (NYSE: DIS). With or without Buffett, these companies will continue operating, growing, and generating earnings.
4) As Berkshire's shares drop in value, investors would do well to take a close look at the company. You may be looking at an attractive buying opportunity. According to some analysts, the company is trading well below its intrinsic value.
Since the rumor of ill health is false and is just a recent one, you might wonder what's been depressing the stock this past year. There are many possibilities, and it's probably a combination of the following:
1) It hasn't been a great year for companies that deal in super-catastrophic insurance, as Berkshire does. As Buffett explained in his 1997 annual letter to shareholders, "What you must understand, however, is that a truly terrible year in the super-cat business is not a possibility -- it's a certainty. The only question is when it will come."
2) The company recently bought General Re, and it appears to be taking a while to work all the kinks out.
3) The market's attention in the past few years has been focused on so-called "technology stocks" and Buffett has largely steered clear of them, claiming to not understand them well enough to invest in them. Some investors have concluded that he's crazy to take this stand.
4) Some of Berkshire's major stock holdings have struggled in recent years (e.g., Gillette, Disney, Coke).
On the Fool's Berkshire message board, Fools have been hashing out what it all means. Some are skittish and panicky; others keep their faith in Buffett's smarts and long-term effectiveness. Click on these links for some insightful posts by MikeMac9, Neuroberks, Tiddman, and UsuallyReasonable. Also of interest should be the board's Frequently Asked Questions and perhaps my write-up on Berkshire from this past October.>>
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