Is Berkshire Hathaway a Buy?

[HenryTo]

Please participate in our poll: Do you think the Oracle of Omaha has lost his touch or do you think he is rightly sitting on a pile of cash waiting for the right moment to pounce? Please let us know your thoughts.

[gregf]

I love Warren, if you haven't read his biography by Roger Lowenstein I highly recommend it.

I would not buy BH for the simple reason that Warren has run the reins on that thing , it's his baby and he's ancient to be managing money - and eventhough he's in great shape, his time on this earth is much closer to it's end than it's beginning. I know he says they have a succession plan and all, but, after reading his bio and how obsessive he was even as a kid, there is no replacing Warren. I have only been investing for about 20 years, but, the better managers seem do it for about 20-30 or so years and then move on to something else. Peter Lynch masterfully stepped down from managing the Magellen fund is the most famous one that comes to mind. Managing money is a younger man's gig IMO. Old dudes are more risk adverse.

The other thing is, once a fund gets so big there are only so many good ideas out there and most of the great growth stories are small companies - there's just no way BH can throw enough of their $ at any one idea and have it make a big impact on the fund, just won't happen IMO. BH is the proverbial elephant in the markets - they have enough cash to buy most of eastern europe for crying out loud! I have found in my studies of mutual funds that once a fund gets so big they are bound to do no better than the general market. And with poor money management, they can do quite a bit worse.

http://www.cba.unl.edu/news/emag/Volume3/Issue1/warren.asp

[efficiency]

I once owned a company called Oakwood Homes. It's fundamentals weren't great, but they DIDN'T suggest a BK candidate.

Nevertheless, they did file bankruptcy, and POOF, my stock was worthless. Lo and behold, Oakwood (along with Clayton homes) is under the Berkshire umbrella.

Given that, along with billions in foreign currency positions, NO...., I don't think he's lost his touch (or his well-crafted grandfatherly image).

[HenryTo]

With a $47 billion cash hoard, Berkshire Hathaway is probably the single best stock one can buy in a credit-constrained environment:
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Berkshire profit rises 33 pct
Fri Aug 3, 2007 6:54PM EDT

By Jonathan Stempel

NEW YORK (Reuters) - Warren Buffett's Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research) (BRKb.N: Quote, Profile, Research) said on Friday second-quarter earnings rose 33 percent as higher insurance and utility profits offset pressure on housing-related businesses from the slowing U.S. real estate market.

Net income for the Omaha, Nebraska-based insurance and investment company rose to $3.12 billion, or $2,018 per Class A share, from $2.35 billion, or $1,522, a year earlier.

Operating profit, excluding investment gains, rose 22 percent to $2.51 billion, or $1,625 per share, from $2.05 billion, or $1,331.

Analysts on average had expected profit of $1,460 per share, according to Reuters Estimates.

Revenue rose 13 percent to $27.35 billion. Berkshire ended the quarter with $46.95 billion of cash, giving Buffett ammunition to make the big acquisition he says he wants.

Insurance underwriting profit rose 70 percent to $632 million, and insurance investment income rose 10 percent to $862 million. Earnings from utilities and energy rose 46 percent to $231 million.

These helped offset declines in pre-tax profit of 34 percent at Shaw Industries, which makes carpeting and flooring, and 20 percent in furniture and transportation equipment leasing. Profit from manufactured housing rose 4 percent.

"Berkshire has substantial exposure to the housing and building cycle," said Thomas Russo, who helps invest $3 billion at Gardner, Russo & Gardner, of which 8 percent is in Berkshire stock.

"The beauty is that a unit like Shaw can decline without having investors question the overall value of Berkshire's long-term structure and capacity to weather the storm."

MORE INVESTMENTS

Known as the Oracle of Omaha, Buffett has transformed Berkshire since 1965 from a failing textile company into a $168 billion conglomerate by acquiring out-of-favor companies with consistent earnings and capable management, and investing in stocks.

Berkshire's equity investments swelled 13 percent since March to $73.61 billion, while its fixed-income investments grew more -- up 15 percent to $24.92 billion. These were before the recent stock market swoon, where investors have tried to reduce their perceived exposure to market risk.

"People are trying to play guessing games as to what equities he'll buy, and this is the kind of market Buffett waits for," Russo said. "But he could just as easily buy mortgage-backed securities -- if other investors panic, that's the time extraordinary returns could be available."

Berkshire's Class A shares closed on Friday down $100 at $109,990 and its Class B shares rose $11 to $3,599. The Class A shares are little changed this year, while the Standard & Poor's 500 (.SPX: Quote, Profile, Research) and insurance (.GSPINSC: Quote, Profile, Research) indexes are up 1 percent and down 9 percent, respectively.

CURRENCY BET

Insurance generated about half of Berkshire's profit. Underwriting gains before taxes at Geico Corp rose 13 percent, as the auto insurer boosted premiums 7 percent. Gains from underwriting more than doubled Berkshire's reinsurance group and its General Re Corp reinsurance unit.

Berkshire posted a $34 million gain from currency bets. Buffett once had a $21 billion bet against the dollar, but unwound most of it as he bought more non-U.S. companies and stocks. He said at Berkshire's May 5 annual shareholder meeting that he was betting on one currency that would "surprise you."

Berkshire owns more than 70 companies that make such things as paint, ice cream and underwear. It also invests in stocks including American Express Co (AXP.N: Quote, Profile, Research), Coca-Cola Co (KO.N: Quote, Profile, Research) and Procter & Gamble Co (PG.N: Quote, Profile, Research).

The company's book value was $115.27 billion on June 30 versus $108.42 billion at year end.