Berkshire Hathaway In Correction - Are Shares a Bargain at $126,400?
Just weeks after closing at an all-time high in mid-December, shares of Warren Buffett's holding company Berkshire Hathaway are falling deeper into 'correction' territory. Berkshire ended today's (Wednesday, January 16) trading at $126,400 each, down over 2 percent on the day.
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That's down 15.3 percent from the December 10 record closing high of $149,200. (On Wall Street, a 'correction'is generally defined as a decline of 10 percent or more from a high. A 'bear market' requires a 20 percent drop.)
For the (still early) trading year so far, Berkshire is down 10.7 percent, underperforming the S&P 500's 6.5 percent decline. Last year, Berkshire trounced the S&P's 3.5 percent advance with a gain of 28.7 percent, its best year since 1998. (That's one excellent reason famously long-term Berkshire investors are probably not getting all that upset with this latest short-term downturn.)
In its article on market trends, Wikipedia notes that a "corrections can be a good opportunity for value-strategy investors... One is able to purchase undervalued stocks with a highly probable upside potential."
As Berkshire approached $150K last month, the well-known value investor and Buffett disciple Whitney Tilsonput the company's intrinsic value at $167,000, in part because last year's calm hurricane season limited payouts by Berkshire's insurance companies. (The Wall Street Journal recently suggested weak pricing for reinsurers may be hurting BRK's share price.)
Tilson's $167K valuation came before Barron's "Sell Buffett" cover story that took Berkshire shares down almost five percent in one dayto $136,400 (December 17). Just afterward, Tilson told me by email the Barron's attack had made Berkshire even more of a bargain.
On tonight's Fast Money, Tilson told Dylan Ratigan and thegang that Berkshire is a cheap stock that's growing nicely. "If you're worried about Armageddon, you want to own the world's strongest balance sheet, with 50 billion dollars in cash, run by the world's greatest capital allocator."
FM trader Jeff Macke endorsed Tilson's call: "Testify! Own the vultures, not the meat!"
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