Hey, I admit that I am infatuated with this company and the guy who runs it, Warren Buffett, I just think it has had a good run and I am a watcher at this point, not a buyer. Berkshire Hathaway Inc. (NYSE: BRK.B) was a strong candidate for inclusion on my 2008 buy list, but today is not the day.
I have written volumes about why BRK.B should be included in new portfolios and is a must on every watchlist, but I just do not see it as the bargain I did when I was promoting it at the $3,600 level. Although it does not pay a dividend, most of its stock holdings do, and Warren Buffett has been the gold standard for creating shareholder equity. If 2008 proves to be a shakey year on Wall Street, you may want to own this stock. That however, will be a reflection of the economy more than stock value.
This week it was announced Berkshire Hathaway executed a $4.5 billion buyout of Marmon. Berkshire has done a lot of buying this year. One example being its 8% stake in Burlington Northern Santa Fe (NYSE: BNI) railroad, reportedly now the largest shareholder. At the same time it has been selling other positions and completed its exit from PetroChina Co LTD ADR (NYSE: PTR) prior to a major pullback in Chinese stocks. Berkshire recognized huge gains from this sale, and it is reflected on the company's bottom line.
I think the major buying activity that Buffett engaged in during 2007 is more likely to be appreciated in late 2009 and 2010 after an absorption period. Given that the stock is currently trading at a P/E of 18.68, my money says 2008 will be flat as profits and increased return on equity are realized and the P/E moves lower to more traditional levels, usually less than the S&P average.
In a recent story when Berkshire reached new highs and was up 35% on the year, I posted Chasing Value: Berkshire Hathaway did what it's supposed to do -- go up! I have nothing bad to say about this stock, but it has had a huge run-up to an all-time high and seems like it has been given full credit for all its virtues. A repeat performance would be hard to envision. Yesterday it closed at $4,570, about 8.5% off its high. If the stock pulls back a little further, I might be a buyer again below $4,200 -- stay tuned, the opportunity may arise. In the meantime, keep watching the stock and "my pal Warren." The education is a far greater value than the stock.
To find potential opportunities and verify my track record, read Chasing Value or Serious Money.
DISCLOSURE: I currently own shares of BRK.B, and PTR.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.
Warren Buffett, tells us more!
Oil has dropped $13, so gasoline should drop 30 cents, Americans hope
Wal-Mart's new Supermercado concept could be huge
