Chasing Value: Berkshire Eating Up Apple -- Can It Continue?

The following chart indicates the two stocks relative performance since the beginning of the year, with a 24% margin in favor of Berkshire Hathaway.

This is not to say that Apple will not reverse course and end the year much higher, because I believe it will, but the catalysts to do so are already known to the market and were the reason the stock bounced back 100% in 2009 revisiting its 2008 high and more to reach $215.59 before settling down.

Berkshire, on the other hand, was relatively stagnant most of the year until 2010, up 20% in two months on the strength of investments in financial enterprises such as Goldman Sachs Group (GS), U.S. Bancorp (USB) and Wells Fargo (WFC). It is also getting traction from its 50-to-1 stock split, inclusion in the S&P 500 and overall improvement in many of its blue-chip stock holdings.

Berkshire reported very strong Q4 earnings and I expect more of the same for the remainder of the year, although tempered by steady but very slow overall economic growth, as the multitude of problems that devastated the world economy will not heal quickly.

While "my pal Warren" has been the world's greatest allocator of capital for decades, the same cannot be said for the world's greatest entrepreneur Steve Jobs, who cannot find a use for Apple's $40 billion and growing mountain of cash. While some shareholders (on Wall Street and Main Street) wonder whether it might be time to offer a dividend, Jobs maintains that the money is a cushion against a faltering economy -- true enough -- and that the psychological effect might harm the share price -- not good.

The cash itself can harm the share price. Given the company's current capitalization around $190 billion, the cash exceeding 20% and earning a paltry return is large enough that gains from the new iPad might have less impact when averaged together. Furthermore, Jobs's recognition that Apple's share price is in part attributable to psychological effects should be a caution sign to new investors buying in near its all-time high.

Apple closed Monday March 1 at $208.99. Berkshire Hathaway B shares closed at $81.90.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture and planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: Among the positions discussed in this post, I own shares of BRK.B and WFC.