Bought Buffett's Berkshire Because it's a Bargain

Today I added a position in Warren Buffett's conglomerate company Berkshire Hathaway (BRK.B), adding 34 shares at $2,938.00 each, for a current holding of $100,062.00. Berkshire's trailing price/earnings ratio is relatively lower than the market, at 17.01.

Glenn Tongue and Whitney Tilson's analysis of Berkshire from November 2005 seems to be a very apt analysis of the stock's relative valuation in comparison to book value, historical price, so-called "intrinsic value", and previous comments by Warren Buffett. At the time the "B" shares were trading at a value of $2,960. Their analysis put the intrinsic value at or near $118,000 for the "A" shares, which would be approximately $3,933 for the "B" shares. In other words, if the intrinsic value were factored into the current stock price, I could realize a potential 33.8% return. Perhaps not likely, but not too shabby as a prospect either.

10 rock-solid stocks is a great little article about powerful, secure investments for 2006. Written by Jon Birger and David Stires, over at FORTUNE Magazine. They make reference to the fact that simply the Fed's recent actions of raising the short-term lending rates increases the yield that Buffett receives from the company's $46 Billion in cash.

The Superinvestors of Graham-and-Doddsville is an intriguing piece written by Warren Buffett himself, analyzing the value investing principles imparted to him by Columbia professor and later colleague, Benjamin Graham. Benjamin Graham and David Dodd collaborated on the book Security Analysis, a bible for value investors. Benjamin Graham's work The Intelligent Investor was previous recommended in a post on Some Great Financial Reads.

Here is an audio interview that Warren Buffett did with Ron Insana over at CNBC. He speaks candidly about upcoming market trending patterns, as well as his annual charitable lunch that raises money for Glide. Topics of conversation included potential acquisitions/buys by Berkshire Hathaway in the energy-utility industry, and the future depreciation of the U.S. dollar and the U.S. deficit. It's about a 5-minute long interview done over the phone (with Warren Buffett in Omaha, Nebraska) and I highly recommend everyone take the time to listen to it.

Finally, most of these references were gleaned from a great site on Warren Buffett's value investing practices and Berkshire Hathaway, aptly titled The Buffett Blog. It's put out by the Buffett Group at the University of Chicago Graduate School of Business. There are some really interesting links and commentary on Buffett in this blog. They even got to meet Buffett in May 2005!

Berkshire Hathaway has returned an average annualized 25% return to investors over the last 25 years. If the stock price appreciates even a quarter of that percentage, I will be more than satisfied.