Should you take advantage of the rare opportunity to own Berkshire Hathaway for less than $100 a share?
On Wednesday, it’s widely believed the board of Berkshire Hathaway will approve a 50-1 split of Class B shares . (In case you’re wondering why, the split is part of Buffett’s deal to buy Burlington Northern Santa Fe Corp.)
But forget the railroad for a moment, what matters here is that after the split shares will sell for about $65 each. Currently Berkshire's Class A shares sell for about $97,500/ each while Class B goes for $3,247/ each.
That means, on Thursday, a block of 100 will become a lot more affordable for many, many investors. But is it a buying opportunity for you?
Whitney Tilson of T2 Partners suggests keeping an eye on this trade because the split may lead to Berkshire’s inclusion in the S&P 500. (In the past Berkshire has been left out because the value of shares has made BRK stock hard to trade.)
If the lower price means being added to the S&P, shares could pop, he says because trillions of dollars mirror moves in the index, and many funds buy stock in the companies in it.
However, that’s not to say a pop is a foregone conclusion, it’s not.
Morningstar analyst Bill Bergman says any company that gets added into the S&P 500 always sees a boost in its stock, but he thinks many investors have already factored that into Berkshire's shares. So becoming part of the S&P 500 may not mean much to Berkshire's share price.
''It's an interesting development, but as far as the value of the shares go, it doesn't mean much,'' Bergman says.
However, there may be another reason to be bullish.
Whitney Tilson thinks Berkshire is also a value -- plain and simple. "The stock is just cheap no matter how you slice it."
"It's trading to one of the biggest discounts to its intrinsic value over the past dozen years," he says. "You can currently buy one of the great conglomerates of all time at less than 2 times pre-tax earnings."
Sounds interesting. Are you now more likely to trade alongside Warren Buffett? We want to know!
As we mentioned on TV Whitney Tilson remains bearish on housing. It's a thesis he first told us about in September of 2009. Click here for more on that trade.
Tilson also sits on the board of the Pershing Square Foundation which just donated $1 million to aid the earthquake victims in Haiti. For more on donations made by the business community to help Haiti click here.
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Trader disclosure: On January 19th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Finerman Owns (AAPL); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM); Finerman's Firm Owns (BAC), (BAC) Leaps; Finerman Owns (BAC) Preferred, (BAC); Finerman's Firm Owns (WFC) Preferred; Finerman's Firm Owns (MCD), (MSFT), (YUM); Terranova Is Short (CMA), (ICE), (ESS), (JCI), (CAL), (AGU); Terranova Owns (QCOM), (MSFT), (DELL), (AAPL), (EMC), (FCX), (FTO), (XOM), (BAC), (JPM); Terranova Owns (POT) Feb. Puts; Terranova Owns (XHB) Mar. Puts
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