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In just eight years, shares of Warren Buffett’s Berkshire Hathaway have doubled. With A-shares now trading above $200,000 for the first time ever, is the stock still a “buy”?
Most people start learning a bit about the stock market when they’re 30 or 40 years old. That’s when they’ve started earning a decent salary and begun setting money aside.
I was lucky enough to begin learning about stocks at a much younger age. One formidable experience was in 1993. My teacher was herself an avid investor, and organized a “stock market game” for our class. The contest included using $100,000 of pretend money, investing it in several stocks, and tracking the returns. Her goal was to help us understand math by learning about the stock market.
After putting us into groups of two, my partner and I decided to “buy” about ten companies. I can’t remember the names of most. But one is easy to remember: Berkshire Hathaway (NYSE: BRK-A).
At the time, I had read about Warren Buffett. But I knew very little about Berkshire.
The reason that we bought the stock was simple: It stock traded around $12,000 or $13,000 per share. We were impressed that a company could have a stock price that was so high. We figured that must mean good things about the company (little did we know how the stock market, valuations, and share prices really work).
At the time, Berkshire Hathaway was by far the highest priced stock. A lot has changed in the last 21 years, but Berkshire remains on top. The stock has soared 1,574% over that period.
Berkshire Beats S&P: 3-to-1
Shares of Berkshire have now surpassed the $200,000 threshold (just eight years after the stock broke through $100,000).
Back in 1993 when I was playing my school stock market game, some investors felt that the highly priced stock had little room to run. Yet since then, the stock has increased 1,574%.
At just over $200,000, one share of Berkshire will purchase a decent house in many American towns. In fact the latest report from the National Association of Realtors shows that the median home in the U.S. sold for $223,300 in June.
Just for fun, I looked up historical home prices. Back in 1993, the median home sold for $103,500. While home values have doubled in the last couple decades, it’s obvious that buying Berkshire would have been a far superior investment.
Shares of Berkshire Hathaway were off limits to most investors until 1996. That’s when the company issued Class B shares, which started trading at a far more reasonable price of around $1,000. And the Berkshire Hathaway (NYSE: BRK-B) became more approachable in 2010, when the company acquired Burlington Northern Railroad and split the B-shares 50-to-1.
At heart, I’m a value investor. And there is no greater value investor in the world than Warren Buffett.
That’s why in March 2011 I bought my first shares of Berkshire Hathaway. At the time, the stock traded around $85. I told my subscribers that the B-shares were worth $111 at the time. And that meant that the stock was about 33% undervalued.
I concluded my case for Berkshire, writing “Berkshire’s days of growing its book value by 20 percent annually may be gone. But today it appears that this stock – along with shares of many large-cap blue chip companies – are unloved and underappreciated. And for that reason, today there isn’t a better Buffett-style investment available than Berkshire Hathaway itself.”
Since then, Berkshire is up 48%. Even after solid gains – and in spite of a lofty price for the A-shares – I love Berkshire Hathaway. I believe that this is the bluest of blue chip stocks, and a company that every investor should own forever.
There is simply no better time to buy a stock like Berkshire than today.
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