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Berkshire Hathaway, Cheap Again?

    📂 Financial         🗨 No Comments

Back on Nov. 20, 2008 when the stock market was touching multi-year low points, Berkshire Hathaway (headed by the famed Warren Buffett) was touching its own low of $75,000/share. A number of notable sites/publications jumped to the defense of the stock, marveling at the opportunity of owning a share of this company at a bargain price.

This one from US News and its follow-up article couldn't hold back the excitement, even claiming that the BRK.A stock (based on some arbitrary metric) should really be valued at $136,000. Were they right or wrong?

Well, both. The share price did indeed shoot back up to about $108,000 within 3 weeks. That would have been a good spot to sell. From there it started to fizzle a bit every week and today it once again tested the Nov 2008 lows, some 3 months later.

At this point it's anyone's guess where it's headed. The fact is that BRK is invested in some of the same companies that are facing severe financial issues these days. If those companies are ailing, what justification is there for BRK to be healthy? BRK is not insulated from the global economic events that has gripped all industries. Nor is it attractively positioned to profit handsomely from economic hardships. As I have mentioned before, BRK also faces one other big risk and that is the age of its CEO, Warren Buffett. Admittedly that risk is most likely priced in, but one must still wonder, where would this company be without its star leader?

So considering everything, is BRK once again at a bargain price or is it over-priced? Only time will tell.


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