FROM BARRON"S:
Warren Buffett's unwillingness to court Wall Street, meanwhile, has meant that Berkshire Hathaway has received virtually no research coverage from major securities firms.
That changed last week when Alice Schroeder, a well-regarded insurance analyst at PaineWebber, recommended Berkshire, arguing the company is worth significantly more than its current price. Her conclusion: Berkshire's Class A shares are worth $91,000-$97,000 a share, above their current price of $63,600. Schroeder's estimate is even more bullish than those of many long-time Buffett watchers on Wall Street, who peg the company's value at around $80,000 a share.
The bullish report, however, had no impact on Berkshire's stock, which fell 2% on the week.
Schroeder's view is that Berkshire is wrongly perceived as simply a sterile investment vehicle thanks to its large holdings in Coca-Cola, Gillette and other stocks but is actually an operating entity because of strong insurance operations, notably GEICO, the auto insurer, and reinsurance. Berkshire just bought General Re, the big reinsurer, for $15 billion in stock. That price was a steal in the eyes of many insurance mavens.
It's rumored that Buffett spent several hours with Schroeder. This talk excited Berkshire's fans because they figured Buffett implicitly blessed her valuation of the company. Buffett wouldn't comment on the report and Schroeder couldn't be reached.
One big potential boost to Berkshire's stock could come if Standard & Poor's decides to include the company in the S&P 500, an event that would unleash a torrent of purchases by index funds because Berkshire is by far the largest U.S. company that isn't in the S&P.
S&P has said low liquidity is the main impediment to including Berkshire in the index. Trading volume has risen markedly in Berkshire's Class B shares since the General Re deal. If the higher volume persists, Berkshire conceivably could join the S&P in the next year.
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I don't believe Buffett will try to get brk into the s&p at all. He obviously had the chance to do this prior to the s&p's decision to not do it in December, but he clearly would have to create more shares(read split the stock or stocks.) He is now creating liquidity problems for shareholders by not splitting. I appreciate where he is coming from on the splt issue, but see no reason why he cannot do a 5 or 10 to 1 split to drop brka down into the 6000-13000 range, if that would prevent these recent problems. Every day the stock doesn't trade for about half an hour. I don't think he will change his mind.
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