Warren Buffett Watch
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Warren Buffett's Berkshire Hathaway Rallies to 6-Month Closing High
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Today's 1.9 percent gain puts Berkshire's Class A shares at $95,300 each. That's just above their May 8 closing high of $95,295 and the best finish since January 13. Berkshire is up 5.3 percent on the week.
Berkshire's rally comes as the overall stock market is also moving higher. Today the S&P and Dow added to yesterday's big gains to finish at fresh 8-1/2 month highs.
(While Buffett told CNBC today he still doesn't see any signs of a near-term economic recovery, he also still thinks stocks will outperform governments bonds over the long-term, despite recent gains that have put the Dow back above 9000.)
The S&P continues to outperform Berkshire with a year-to-date gain of 8.4 percent, excluding dividends. Berkshire Hathaway is still in negative territory for the year with a loss of 1.4 percent. It has, however, jumped by almost a third from its 2009 closing low of $72,400 on March 5. At that point, it was down 25 percent on the year.
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Along with Berkshire's rising stock price, there's another rally that's helping boost Buffett's "investment street cred," as the New York Post terms it.
Goldman Sachs [GS
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] shares have soared to the mid $160s, vindicating Buffett's multi-billion dollar investment in the firm last fall. That move drew some criticism as Goldman's shares fell to the low $50s in late November, even though Berkshire was, and is, getting a 10 percent annual return on its $5 billion loan (in the form of preferred stock,) as long as Goldman doesn't go under altogether.
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Warrants to buy $5 billion worth of Goldman common stock at $115 a share through October, 2013, were also part of the deal. Buffett considered them a "bonus." That bonus would generate over $2.1 billion in profits if cashed in now.
Buffett, however, says he has no intention of locking in the gains anytime soon. Today he told Fox Business News (as relayed by Dow Jones):
"We're getting almost $1,000 a minute on preferred stock investments, so I try not to answer the phone if I think Goldman's calling. Every instinct in my body tells me that we will want to hold those warrants until they're very close to their expiration date. The preferred pays us the dividend and the warrants are going to make us the money."
Why doesn't Buffett want to answer the phone? Goldman can buy back the $5 billion in preferred shares at any time by paying a 10 percent premium, depriving Berkshire of all those future annual 10 percent payouts.
Current Berkshire stock prices:
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Class A: [US;BRK.A
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Class B: [US;BRK.B
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Data is a real-time snapshot *Data is delayed at least 15 minutes
