Q: What do you think about investing in a share or two of Berkshire Hathaway Inc. Class B? It is expensive, but Warren Buffett seems to be a genius.
F.P., via the Internet
A: Although the diversified holding company’s Class B shares, trading at just under $4,500 apiece, are admittedly less expensive than Class A shares at nearly $134,000, that’s still no pittance.
Because Berkshire Hathaway Class B (BRKB) shares are down 6 percent this year after gains of 29 percent last year and 25 percent in 2006, however, you could view this as a buying opportunity.
Best known for Buffett, its savvy chairman and chief executive, Berkshire owns and operates more than 70 businesses and invests in undervalued stocks and bonds. It is a significant shareholder in such companies as Coca-Cola, Moody’s and American Express.
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Fourth-quarter earnings were down 18 percent on lower investment gains and a drop in insurance underwriting. Buffett has warned that the insurance business is likely to become tougher this year.
Berkshire has little holding company debt, a solid cash position and excellent financial health.
Buffett has been investing aggressively to take advantage of the current distressed market. He has started a bond insurance company called Berkshire Hathaway Assurance, backed by Berkshire capital.
Its General Re Corp. unit is the world’s only AAA-rated reinsurer.
On the negative side, four former General Re executives recently were convicted on charges stemming from allegations of fraudulent transactions that inflated reserves of its largest client, American International Group Inc.
Though shareholders would love to know the 77-year-old Buffett’s succession plans, he has not announced them. Often mentioned as candidates for the firm’s position of CEO in charge of operations are top Berkshire insurance executives Tony Nicely, Ajit Jain and Louis Simpson. Buffett has launched a separate search for a chief investment officer, saying he has narrowed the hunt to four candidates who are “young to middle-aged, well-to-do to rich.”
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Andrew Leckey is a Tribune Media Services columnist. E-mail him at yourmoney @tribune.com.