Reader L.N. Wright recently posed us a good question:
"What's up with BRK-B shares? They've been down quite a bit lately, and I can't find much commentary about current performance. Everyone seems to want to talk about the `good-ole-days', and how much Warren Buffett made over the past 30 or so years. What I want to know is whether the consensus is that it's worth owning the stock now and if it is expected to outperform the market in the future as it has in the past. "
One Wall Street analyst rates Buffett's Berkshire Hathaway Inc. (NYSE:BRK.A) a buy at the current bargain price of $106,700. Three consider it a hold and one rates it a sell. Yes, someone is on record urging people to sell stock in the company of the world's greatest investor. Their median target is $121,300, according to Thomson Financial. So if you follow me, the consensus is not to buy the shares even though they are going to go up.
I'm not quite sure what his beef is regarding the stock's performance. The shares haven't done much over the past three months but have jumped 20 percent over the past year.
Should someone who has the cash -- a very lucky person indeed -- snap them up now?
Well, Berkshire's Geico unit is being hurt by pricing pressures in the auto insurance market. During the third quarter, the company sounded a note of caution saying, "The industry's profitability is sure to decline next year – substantially in all probability – and Berkshire's insurers will not be immune from industry trends...We do expect, however, that our insurance results will usually outpace those of the industry and that our long-term advantage could be significant."
The company's NetJets fractional ownership business saw revenue rise 32 percent in the third quarter. It should continue to do well as budget-conscious companies get rid of their corporate aircraft. The energy business may benefit from rising natural gas prices. Buffett's savvy acquisitions such as the press release distribution company BusinessWire will boost the bottom line.
Buffett, of course, manages his business for the long-term and has long advocated that companies not give quarterly guidance. For what it's worth, I agree with him on that point. Too much time and effort is wasted on playing the quarterly earnings game.
That's not to say that Berkshire investors don't care about quarterly results, but they know that if the numbers in one business are down that others will take up the slack. Moreover, they realize that their patience will be rewarded.
--Jonathan Berr is the editor of http://www.desperateinvestors.com
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Reader Comments (Page 1 of 1)
1-29-2007 @ 11:33AM
NextWarrenBuffett said...
I love your article, I'm a huge Warren Buffett fan, I blogged about your article on my site http://www.nextwarrenbuffett.com/news/
1-31-2007 @ 11:07PM
snickerdo9 said...
I own 5 shares of brk.b . I intend to buy more over time ; especially after I roll my 401k over to a discount brokerage upon retireing within two years . The shares that I have there now just set so I don't pay any maintanence fees . I bought in (3) shares 2 1/2 years ago ( 2787.00 ) . I purchased 3 additional before the annual shareholders meeting last May. The highest I've seen the "b" shares go was to 3800.00; probably late summer and or early fall of 06 . I've learned that patience is a virtue with Mr. "B".
1-29-2007 @ 10:16PM
Sheldon L said...
SSSOOOOOOO, Snicker you own 5 shares of BRK.B having bought 3 shares 2-1/2 years ago and then 3 more before the annual meeting last May.....hmmm something does not add up? I see why one might snicker.
1-30-2007 @ 11:19PM
snickerdo9 said...
Thanks 4 u're response Sheldon:
uh-oh statements such as the ignorance displayed in u're posting could only come from a " Buffett hater " . If u can add 3 and 3 = 6 ; the equivalnent of what each share closed at today "3636.00". That's what adds up. At least I invest with a ceo and reputable company that I can trust my money with not having to worry about the " corporate crooks " that other companies and businesses are infested with whether I own 5 ( and counting ) or 5000 shares. Otherwise aside from bieng able to retire comfortably in a couple of years and to buy many more shares of " hathaway " as I want over the course of time I'm
" snickering " at the fact that I've invested well as far as lifesavings goes. Get a life.
SSSOOOOOOO, Snicker you own 5 shares of BRK.B having bought 3 shares 2-1/2 years ago and then 3 more before the annual meeting last May.....hmmm something does not add up? I see why one might snicker.
1-31-2007 @ 10:59PM
Sheldon L said...
Hey snicker...math a problem, not your investing in Buffett, SEE MY STORY:
http://www.bloggingstocks.com/2007/01/30/buffett-or-cramer-oh-please/