Sunday, February 28, 2010

Berkshire Hathaway Achilles Heel

Berkshire Hathaway (BRK.A;BRK.B) is undoubtedly one of the most unique investment vehicles in the history of economics. Significant positions in both legacy investments such as Geico and Burlington Northern and then they have major stock positions which they can sell off.

The problem with the large legacy positions is that they are not saleable under any circumstances. If you are an investor you need to understand what your exit plan can be. Only Americans who have not experienced significant conflict on American soil think something can be forever.

What would the valuation be if the market realizes that Warren Buffet wants to sell something that he owns 100% of? Why would the smartest investor in the history of the world want to sell something? The only time Warren Buffet sells is when he has lost confidence.

This is probably the Achilles heel and will one day cause Berkshire shares to experience a toxic event.