Time to buy a slice of Buffett?

By Joe Light, Money magazine staff writer

(Money Magazine) -- Warren Buffett may seem like a cheap date, given his penchant for Dairy Queen. But to pick up shares of his Berkshire Hathaway you've had to fork over Le Cirque prices. Indeed, Berkshire's A-shares (BRK.A) recently sold for more than $100,000 apiece, while the "more affordable" B-shares (BRK.B) were nearly $3,500.

All that changed in January, however, when the company's shareholders approved the 50-for-1 split announced late last year. That was when Buffett agreed to buy the part of Burlington Northern that he didn't already own (using stock as part of the deal).

Joe Light, Money magazine staff writer
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Now all you need is about $78 to bet on the Oracle of Omaha. So should you? The split alone, as you know, won't change the value of the business -- it's just cutting Berkshire into smaller slices. But the repercussions of the split announcement are reasons to hold off.

1. You don't have to buy the stock to own it anymore.

An unintended consequence of the split was that Berkshire became eligible for inclusion in the Standard & Poor's 500 index, and officially joined the index last Friday. So if you already have $100,000 in an S&P 500 fund, you now own about $1,100 worth of Buffett's company.

2. Berkshire could start to resemble the rest of the market.

In the past, Buffett resisted splitting his stock because he believed high prices deterred short-term investors from cycling into and out of his firm. But Berkshire's move, coupled with its entry into the widely followed S&P, could make the stock just as volatile as the broad market.

3. The stock isn't the screaming bargain it once was.

Buffett said recently that his company's stock is undervalued. But Vitaliy Katsenelson, a fund manager with Investment Management Associates, points out that Buffett has also argued that acquisitions should not be made using stock in cases where the acquirer's shares are undervalued.

To be fair, Buffett is using only 40% stock in the deal; the rest is in cash. Nevertheless, last year Money laid out the case for why Berkshire was trading about 10% below its real value. Since then, the stock price has jumped more than 20%.  To top of page

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