Joining Buffett — for $2,500 a share
By Warren Boroson
(Morris County, N.J.) Daily Record
Two formidable investors recently recommended the same stock. It happens to be a stock that I have owned for a few years, one that has made me a nice profit.
You want a hint?
A single share can cost about $2,500. Or, if you have more money to spare, about $75,000.
If you haven't guessed, the stock is Berkshire Hathaway, the conglomerate managed by the Sage of Omaha, Warren E. Buffett. (There's little difference between the A and the B shares, apart from the fact that the A shares cost 30 times more.)
First to recommend Berkshire was Larry Pitkowsky, one of the managers of the dazzling Fairholme Fund in Short Hills, which invests in companies run by gifted investors.
"We continue to be optimistic about the near-term business outlook for Berkshire Hathaway," he said. "Berkshire's insurance businesses are now hitting on all cylinders, and the company continues to utilize its substantial cash hoard to make attractive acquisitions."
Next: David Winters, chairman and CEO of the Franklin Mutual Series funds, who spoke during a financial seminar recently.
Have you noticed that your insurance bills are going up? he asked. That's good for insurance companies, and Berkshire happens to have invested in a lot of them, including GeneralCologne RE, GEICO and National Indemnity.
Besides, Berkshire stock has languished of late, Winters pointed out, so its current price seems reasonable. One problem that Winters noted: Buffett is 73, and he might decide to retire soon.
Both Fairholme and the Mutual Series funds, headquartered on the same floor of a building in the Mall at Short Hills, are invested in Berkshire.
Not many stock analysts cover Berkshire, possibly because it's so difficult to analyze. This is a company that owns or has invested in American Express, Coca-Cola, Gillette, Wells Fargo, Moody's, the Washington Post and H&R Block. Along with NetJets (which sells fractional ownership in jet planes), Benjamin Moore paint, See's Candies and International Dairy Queen.
A few years ago, a Prudential analyst made quite a splash by saying Berkshire stock was wildly undervalued; Buffett, naturally, played up her outlandish remarks.
One respected analyst who covers the stock is Anthony P. Pandolfi of the Value Line Investment Survey, who notes how well the insurance operations have been doing lately.
He also points out that the company is more diversified these days. Berkshire's noninsurance operations now account for 41 percent of the business compared with 21 percent only three years ago.
Berkshire offers investors "safety and worthwhile three- to five-year appreciation potential," Pandolfi concludes.
Value Line rates the stock above average for both timeliness and safety.
Berkshire Hathaway B shares (BRKB) are traded on the New York Stock Exchange.
A terrific book about Buffett is "The Making of an American Capitalist" (Doubleday, 1996) by Roger Lowenstein.
Incidentally, I wrote a book a few years ago called "J.K. Lasser's How to Pick Stocks Like Warren Buffett." As I recall, the book contained almost 300 pages. And although it's a fine book, the fact is I could have kept its length to one sentence: "Buy shares of Berkshire Hathaway." (Reminds me of another book I wrote a while ago called "How to Sell Your House in a Buyer's Market." It took me more than 300 pages to say: Lower the price.)
Buffett certainly is a true American hero, something that I readily grant, even though he has always been contemptuous of the media. The way he favors Fortune magazine with his public pronouncements, and the way Fortune in turn treats him like a combination of King Solomon and St. Francis of Assisi is nothing short of embarrassing.
In any case, remember: One share of Berkshire Hathaway costs only $2,500. Not $75,000.
