Filed under: Major movement, Berkshire Hathaway (BRK.A), Top Picks 2007, Bargain stocks, Comfort Zone Investing, Serious Money, Headline news, Stocks to Buy, Stocks to Sell
The headline story in Barron’s (subscription required) this week “Sell Buffett” may have created a buying opportunity! I thought that the story by Andrew Barry was a very fair analysis. However, since I wrote Chasing Value: Berkshire Hathaway did what it’s supposed to do — go up! like Barron’s, calling attention to Berkshire Hathaway (NYSE: BRK.A)’s stock rise and suggesting investors put it on their watch list waiting for a pullback — Barron’s might have triggered just such a slip.
In Barron’s story, they make the case that fair value for BRK.A is probably around $130,000. It was $142,400 at the time of publication. The article advocates Berkshire is overvalued by at least 10%. Guess what, today the BRK.A shares are trading around $133,000, down about 9%.
When I wrote a week before the Barron’s story came out, I recommended the same thing they did, but unlike Barron’s, I felt that if it came down it would be worth buying, not because it was set to jet in the near future, but because a 10% to 15% pullback gives you the chance to add one of the most solid companies in the investing universe to your core holdings at a time when the market is very erratic, and oil, gold, interest rates, food, energy, housing, etc. is in turmoil.
There might be superior stocks for those looking to make a quick buck, but if you are building a long-term portfolio with 10 to 20 holdings, I don’t see why Berkshire should not be included. For most people, it makes much more sense to buy BRK.B shares, which I own in several portfolios. These B-shares were trading for $4,905 when I called readers’ attention to the stock. It is trading at $4,443 as I write at 2:00 PM EST, a pullback of 9.4%.
I am watching Berkshire very closely, and if it continues to fall I will purchase some more and write a thank you to Barron’s and Andrew Barry for contributing to the opportunity.
To verify my track record, including bad calls, read Chasing Value and Serious Money.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.
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