Would Warren Buffett invest in Berkshire Hathaway today?

The issue of BARRON'S I've been reading also has an interesting, contrarian article on Warren Buffett and Berkshire Hathaway -- Questioning the Cult of Buffett by Stephen P. Mauzy.

One criticism is of Buffett's steadfast refusal to split stock shares, so one is now worth upwards to $100,000. He says that the stock market would not be a place for small investors if all companies did this. True, but so what? Berkshire Hathaway is not a huge public company like General Motors.

He makes a good point that most of Berkshire Hathaway's outstanding returns occurred before the past 5 years. The real villain is size. It's grown so large thanks to its past successes. As the author points out, Berkshire Hathaway is in effect a closed end mutual fund.

What's a more serious defect for would-be buyers, is that it's selling at a 60% premium to its net asset value.

Also, I insist, it should pay out a dividend as well. Buffett invests for a high cash return. He is consciously raising the market value of the stock, but it means that money used to buy shares of Berkshire Hathaway today will not return any money to you until you sell it. What is the time value of the money you use to buy a share, when you get no immediate return? And presumably will never get a return because you wouldn't want to buy it while Buffett is still in charge, would you?

Would Buffett buy a stock that pays no dividend, shelling out a 60% premium over its fair market asset value?

Not likely, methinks. If Buffett did that, Benjamin Graham would be spinning in his grave.




Berkshire Hathaway
Berkshire Hathaway