Why Berkshire Hathaway Is At Its Cheapest Valuation In Decades

warren buffett

Despite having a relatively calm 2011 compared to many other funds, Warren Buffett’s Berkshire Hathaway’s stock price doesn’t reflect the same sentiment.

According to the Wall Street Journal, Berkshire is currently trading at about 1.1x book value—a low that hasn’t been seen in decades. The stock also dropped 4.7% in 2011 and has trailed the S&P’s performance so far this year. But is it likely that Berkshire saw better returns than the S&P last year.

There are several reasons why this may be happening

  • Investors are unsure if Buffett’s eventual successor will be able to replicate his successful investment choices.
  • The fund’s large size—$160 billion AUM—means that returns l
  • Berkshire investor base is changing, while the company used to draw long-term investors, there are some who are unwilling to wait long for positive returns (what Berkshire is known for).
  • Berkshire execs are fond of giving Berkshire shares away to nonprofits and charitable organisations, who usually sell the shares immediately, which can depress prices.

In any case, Buffett’s letter to Berkshire shareholders is expected to drop Saturday, so we’ll soon see what the Oracle of Omaha thinks himself.

Read the whole WSJ report here >

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