I haven’t bought shares of Berkshire Hathaway (BRK-B) in about a year and a half — the last time I added to my Berkshire holdings was just before Buffett and the board publicly announced that they’d authorize buying back shares if they dipped below what they considered a fair price. At the time that was 1.1X book value, but they since raised it to 1.2X book, and the stock hasn’t dipped meaningfully since then.
But I had some cash available in the account where my Berkshire shares are sitting, and I decided to deploy that cash into additional Berkshire shares today — it’s not a big buy here at $99 a share, but my holdings are bumping up by 15% or so now and Berkshire remains one of my top positions.
This is obviously among the bluest of the blue chip companies available — their businesses are benefitting from the oil boom (Burlington Northern), from cheap gas prices (MidAmerican Energy), from the housing recovery (paints and bricks and modular homes and realtors), from the firming insurance market, and, well, things are generally looking sunny for the Nebraska-based conglomerate these days. The shares are up a bit recently because the Heinz deal has once again shown the value of an extra $20-40 billion in the hands of Warren Buffett, who managed to buy into one of the country’s great branded consumer products companies at a reasonable price, get a strong global management team to run it for him, and also pick up yet more cash flow in the form of a high-yielding preferred stock financing deal that pays 9%. I thought Buffett’s moves during the financial crisis in bailing out Goldman Sachs and GE might have been some of the better deals he has made, with good income and upside in exchange for access to his capital and his public stamp of approval, but the Heinz deal might be even better over the long run because of that large preferred share piece.
That’s still not going to meaningfully move the needle for Berkshire over the next year, but it’s yet another sign that Buffett is sharp, quick, on his game and getting access to deals that other people just won’t see. The stock isn’t dirt cheap, at about 1.3X book now, but it’s certainly reasonable and growing and I think the downside is very limited… and it wouldn’t ...