Monday, February 27, 2006

I want my Baby Berks

Here at growthinvalue, we're all about turning over new leaves.

So I figure if I want to get serious about shedding my get-rich-quick ways and becoming a long-term growth investor, what better way to learn than by putting my money where my mouth is and falling in line behind the man who started it all.

Warren Buffett, a.k.a. the second-richest man in the world, a.k.a. the Oracle of Omaha, a.k.a. the world's greatest investor. Surely he's the man to lead me to the promised land. Problem is, ol' Warren is notoriously stingy about giving out stock advice. In fact, the only stock advice he's ever given is "buy shares in my company and hold them."

If you don't know the story of Berkshire Hathaway, it really is a fascinating tale. Essentially, in the 1970's a young Buffet bought a bankrupt Nebraska company called Berkshire Hathaway and used it as a holding corporation to launch his investing empire. Over the years, the stock grew and grew and grew to the point that a single share in Berkshire is worth in excess of $80,000 today. 99% of investors are scared away by such a high price, so most companies would have split their shares about a million times by now. But Buffett doesn't believe in stock splitting, and has let the shares soar.

In short, I want in. But lacking 90 grand lying around between the couch cushions in my apartment, I had to go through the back door. With my tax return this year, (expected to be somewhere in the 3-4K range) I'm going to be buying a single share in a Berkshire Hathaway class B share, currently trading at a little under 3 grand. I'm still not entirely sure what the difference is between the A shares and B shares — beyond the 80 thou, that is. So I'm a little in the dark on the whole concept. And being in the dark before buying an investment goes against the GIV credo.

I'll be doing a little reading over the next few weeks. But barring some sort of major event, I'm expecting to buy my very own Baby Berk some time in March. When I'm retiring 30 years from now, I'm sure that single share will only be a small part of my portfolio. But getting to look at it every day in my online brokerage account should be an excellent reminder of the importance of thinking long term

5 comments:

Canadian Capitalist said...

One BRK.b is worth 1/30 BRK.a. BTW, there are some excellent books on the Buffett school of investing. I personally like The Warren Buffett Way. And don't forget to check out the Berkshire annual reports. They are available free on the web and are an excellent resource.

Loi Tran said...

Also, I think Berkshire B shares do not have voting rights, but that does not matter. When Brk.B is worth more than 1/30, it's a good buy compared to Berkshire Hathaway A shares.

Anonymous said...

Just feel the berkshire stocks will just follow most indexes. no doubt buffet is a great investor, but he can no longer buy small companies. he needs to look at billion dollar companies.
better stocks out there to buy.
Buffet is a great investor just question the returns you will get from this stock.
thanks
Ron

Lou said...

Before one speaks or writes, do your homework! All one needs to do is go to the Berkshire Hathaway site and read Mr. Buffett's document: "Comparative Rights and Relative Prices of Class A and B Stock "

or simply click here:
http://www.berkshirehathaway.com/compab.html

In short Canadian Capitalist is correct and Loi Tran is not. Class B shares can never be valued more than 1/30th of a class A share. (However, it can be valued less...)
Class B shares have 1/200th the vote of a single Class A share, not 1/30th.

Either class share does get an invite to the annual shareholders meeting in Omaha. While I doubt the weekend will make you a more savvy investor, I think its an experience that is far better than a backstage pass to a Rolling Stones concert!

Lou said...

Before one speaks or writes, do your homework! All one needs to do is go to the Berkshire Hathaway site and read Mr. Buffett's document: "Comparative Rights and Relative Prices of Class A and B Stock "

or simply click here:
http://www.berkshirehathaway.com/compab.html

In short Canadian Capitalist is correct and Loi Tran is not. Class B shares can never be valued more than 1/30th of a class A share. (However, it can be valued less...)
Class B shares have 1/200th the vote of a single Class A share, not 1/30th.

Either class share does get an invite to the annual shareholders meeting in Omaha. While I doubt the weekend will make you a more savvy investor, I think its an experience that is far better than a backstage pass to a Rolling Stones concert!