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Berkshire Struggles With Being Ignored


Liberty
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http://online.wsj.com/article/SB10001424052970204778604577241224279057882.html

 

By Warren Buffett's reckoning, his company had a good 2011. But you would hardly know it to look at Berkshire Hathaway Inc.'s stock price.

 

When Mr. Buffett releases his annual letter to shareholders on Saturday, the renowned investor is expected to emphasize that his company's value increased faster than the stock market last year, the first such performance in three years.

 

The Omaha, Neb., conglomerate's growth in book value per share—a measure of net worth, and the performance yardstick Mr. Buffett favors—likely beat the Standard & Poor's 500-stock index's 2.1% return last year by a few percentage points, several analysts estimate. Berkshire likely saw improved earnings at its railroad and manufacturing businesses as well as stock-investment gains in 2011, they say.

 

But in a twist that puzzles many Berkshire Hathaway followers, the company run by the 81-year-old billionaire has by some measures rarely been more ignored by the market. After dropping 4.7% in 2011 and rising only half as much as the S&P 500 index so far this year, Berkshire shares are trading near their lowest valuation in decades: close to 1.1 times book value, versus its average valuation of about 1.6 times book value over the past two decades.

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I was struggling with the complete lack of understanding the author has of our culture by implying that low market price to book value (which is less than intrinsic value in this case) is the cause of some sort of frustration!  I usually don't get frustrated by such opportunities!  Fortunately, the WSJ lightened the mood in short order by demanding I sign in to continue reading . . .LOL  good one WSJ!!!

 

 

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I think what is meant is that many followers are puzzled as to why the market ignores Berkshire (especially after its long-term outperformance). I think most value investors know the answer but it's another story trying to get the reasoning across to the average stock market investor.

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"But in a twist that puzzles many Berkshire Hathaway followers"

 

-Not puzzled here, was just happy to buy more shares in the last year!

(Myth, do we agree on this one?)

 

Yes we do though I have never owned Berkshire. We do agree that its an excellent investment.

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Guest ValueCarl

The last time Berkshire was ignored to such a great extent, was right into the pinnacle of the Y2K Tech Bubble, March of that calendar year specifically. Although the Oracle had made reference to buying back stock, "Mr. Market" took care of his stock price for him quite nicely from that point forward so that he didn't have to.

 

For some reason, the long term A chart is dysfunctional, but the B's offer a mirror image reflecting the same DATA.

 

http://finance.yahoo.com/q/bc?s=BRK-B&t=my&l=on&z=l&q=l&c=

 

"This time is different" in a number of very counter intuitive and interesting ways.  ;)

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