Dobbs and Eisen Boost Buffett

09/19/2003 12:00 am EST


Lou Dobbs

Anchor and Managing Editor, CNN News

Based on the belief that good people equal good business, Lou Dobbs, in his The Lou Dobbs Money Letter,  interviews those he feels represent the very best in quality management, financial expertise and business leadership. In his latest issue, he and money manager Harvey Eisen discuss Warren Buffett's Berkshire Hathaway Inc.

Lou Dobbs notes, "In my interview with Harvey Eisen (excerpts are featured below), he mentions Berkshire Hathaway Class B shares (BRK.B  NYSE) as one of the stocks he's most enthusiastic about right now. Since Berkshire Hathaway is a different kind of investment, I wanted to give you a quick overview of this company. First, it's run by Warren Buffett, my personal investing hero and arguably the most successful (and famous) investor of our time - maybe ever. Berkshire Hathaway is really a holding company, meaning they own other companies. I've told Warren before that it amazes me he still considers himself an individual stock investor. He doesn't invest in stocks; he invests in the whole company. So those who buy shares in Berkshire Hathaway are actually investing in a variety of companies. In selecting the ones to acquire, Warren's strategy is to 'purchase businesses with consistent earning power, good returns on equity, able and honest management and at sensible prices.'

Warren Buffett"Many of Berkshire's holdings are insurance companies, but the list is quite varied: GEICO, Dairy Queen and Fruit of the Loom are among the subsidiaries, and stock positions include Coca-Cola, American Express, Gillette, The Washington Post and Moody's. It may sound a little bit like a mutual fund, which is correct in the sense that you are investing in more than one company. However, a big difference is that Warren and his number-two man, Charlie Munger, usually own large stakes in the companies they acquire and are sometimes directors of those companies, meaning they play a role in running them. There are two ways investors can ride Warren's distinguished coattails by investing in  Berkshire Hathaway Class A shares (BRK.A  NYSE) and Class B shares. For most, Class B are the way to go. Class A shares sell for about $75,000 right now, where as B shares are designed to sell for 1/30th of that price, about $2,500 at the moment. The biggest difference is that owners of B shares have less voting power (1/200th) than owners of A shares, but when the company is run by Warren Buffett, chances are you'll vote with him anyway."

"I think Berkshire Hathaway is at an interesting inflection point," says Harvey Eisen of Bedford Oaks Partners in his interview with Lou Dobbs. "The stock really hasn't done very much for the last several years. Number one, it's trading at a valuation that is unusually low for that company. Number two, I think that everything is now working for Berkshire. I think the insurance business, which has been a huge drag on earnings because of the losses that they had when they acquired General Re, has now been dealt with. I think the investment portfolio is going extraordinarily well. And I think the operating companies are doing very well. So of my selections, the one I would focus on is Berkshire, given the fact that it has not moved, and in my view is both a unique company and is very reasonably valued. It's an intriguing company."

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