Wednesday, January 20, 2010
SUSIE GHARIB: No more sticker shock for Berkshire Hathaway stock. At 9:30 a.m. Eastern time tomorrow, right here at the New York Stock Exchange, investors can buy Warren Buffett's class B shares for about $70 each. That's a lot more attractive than today's $3,000-plus price tag. Berkshire shareholders voted yes today to split those class B shares 50 to one. Suzanne Pratt looks at whether the split really makes a difference.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: It's now a lot cheaper to own a piece of Warren Buffett. Today's stock split sets the stage for Berkshire Hathaway's planned purchase of railroad giant Burlington Northern. But, the split is also likely to attract new investors to the oracle of Omaha, particularly those previously put off by his company's lofty stock price. Berkshire Hathway's class B shares are already a top holding for the Wintergreen Fund, run by David Winters.
DAVID WINTERS, CEO, WINTERGREEN ADVISORS: People for some reason don't want to buy a stock at $3,000. But they are willing to pay $70 for a stock. But it may in fact attract more buyers and Berkshire could go up because of it. It doesn't make sense, but it may happen.
PRATT: The lower price should increase trading volume and that in turn may make it eligible for the exclusive S&P 500 index. Once included, index funds would then be forced to buy the stock. But, Morningstar analyst Bill Bergman says the anticipated pop for Berkshire is not enough of a reason to buy in.
BILL BERGMAN, ANALYST, MORNINGSTAR: That's already in the market price for Berkshire Hathaway. The things that really matter, stock splits normally don't matter that much, going into the S&P 500 that's an interesting development. But, what really matters for Berkshire Hathaway is the long-run viability of its business model.
PRATT: Many experts say the Berkshire business model gets brighter daily as the U.S. recovery picks up steam. That's because the conglomerate is in so many economically sensitive businesses.
BERGMAN: They sell things like (INAUDIBLE) candy and paint, Benjamin Moore paint, the basics, the fabric of our lives. So, as I think the economy improves and with the split, the stock should go up a lot.
PRATT: But, there's still one more big issue for Berkshire Hathaway's stock. Buffett is still mum about who will replace him if he ever retires. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
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