Warren Buffett Now Works For Me!
I finally purchased my first share of Berkshire Hathaway today. Yes, its only 1 share but at $4,700 per share you want to ease into this sort of investment! BRK has two classes of shares. The A-class share (BRK-A) which sell for $140,000 EACH and the B-class share. I obviously bought the poor man’s class.
I had been watching it for the past year and every time I was going to buy, it had jumped 10% in the past week. I kept waiting for a pullback, but the stock would only consolidate and then after forming a base would jump again. I finally took the plunge and put in an order on Sunday, to be executed when the markets opened bright and early Monday morning.
With investments in a variety of different sectors like consumer retail, homebuilding, financials, commodities, currencies and foreign markets, its more diversified than most hedge funds. And it has lower fees than them too.
I’m going to try and attend the annual Berkshire shareholdes meeting in Omaha, Nebraska in the spring. I’ve heard there’s some sort of snobbery attached to owning the A-class shares vs the B-class. Apparently its the first thing other shareholders inquire when they meet each other there.
But even if I could afford to plunk down $140k in one stock, I’d still buy the B-shares. The B-shares don’t carry any voting rights, but I’m not going to delude myself into thinking that 1 lousy A-class share or even 1,000 shares would carry any weight in the running of the company. Warren Buffett owns the majority of the voting shares and besides, most shareholders vote to go with Buffett’s decisions anyway.
The advantage to owning B-class shares is that if you need the money to pay for a new house, a college degree, a heart-transplant or maybe a yacht, instead of selling $140,000 worth of stock in one go (and facing the resulting tax consequences), you can sell the exact amount you need (in ~$5,000 increments) and keep the rest invested. Its up 50 times in the past 10 years, and nearly 30% in the past year. Definitely a stock worth keeping for the long term.
Where else can I get a Billionaire to look after my investments and send me free investment advice every year?
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December 4th, 2007 at 12:09 am
I enjoyed this. I never thought of the taxes before with Berkshire. I agree with everything. Also, when he has cash and puts it to use it is almost always a good return. So if the stock goes down he is always adding value.
December 4th, 2007 at 5:07 am
I would invest in Berkshire in a heartbeat, but the problem is that this guy isn’t going to be around for the ‘long-term’.. at least not compared to me..
(knock on wood) And although he doesn’t plan on simply passing down the throne to his kids (which is a GOOD thing), I wonder if his successor will be as good as The Oracle of Omaha.
December 4th, 2007 at 6:53 am
He is a great investor. This makes me want to grab a few shares… Congrats and hopefully we will both be adding A class shares or a few 100 B class shares soon.
December 4th, 2007 at 9:24 am
Welcome to the poor man’s club
I bought 1 share also, I was happy to get it at $3530
December 5th, 2007 at 9:29 pm
i kept on saying buy it at $2500 thinking it couldnt go up, that much more……now look at it..
December 5th, 2007 at 9:38 pm
& its up another $200 since I bought it. Looks like it might cross $5,000 this week. I’d have bought more, but I’m saving up to buy a condo in thailand!
December 6th, 2007 at 6:14 am
Wow. This is the second article I’ve come across recently about the B shares. It’s definitely something to look into investing in. How many fund managers out there have come close to Buffet’s returns?
December 6th, 2007 at 9:53 am
very few. infact, most don’t even beat the index averages.
& Buffett has consistently beat the index averages for over 30 years.
December 6th, 2007 at 2:09 pm
awcool. Good point. The success of Berkshire is Buffett using the insurance float and being the or one of the greatest investors in history. When he leaves, unless his predecessor is on this level which is highly unlikely, Berkshire will be no more than the big conglomerate it is.
December 6th, 2007 at 7:17 pm
Mark - When Buffett leaves there may still be Charlie Munger as well as, I forget his name, the person who runs GEICO around to make investments. I’m sure he’ll leave the company in good hands.
December 7th, 2007 at 7:27 am
[…] Living Off Dividends has a new staff member - Warren Buffet. He recently bought some Berkshire and is looking forward to heading out to the annual meeting. […]
December 20th, 2007 at 7:09 pm
Hey!…Thanks for the nice read, keep up the interesting posts..what a nice Thursday
December 22nd, 2007 at 12:33 pm
No voting rights? You get 1/200th of the voting rights a class A gets. Not much, but a property right none the less.
http://www.berkshirehathaway.com/compab.html
January 12th, 2008 at 2:53 am
Berkshire doesn’t pay a dividend so this purchase doesn’t help build your passive income stream at all. Any money you invest is dead money until you sell.
January 12th, 2008 at 3:46 am
thats correct. my goal is to put most of my investment money into dividend paying stocks, not all of it.
another way to look at is it like a retirement fund. Its well diversified and has no tax implications until I sell it.
January 12th, 2008 at 7:19 am
To BRK owners–Consider BIF. It is a closed end ,pays a large per month dividend and 30% holdings are in BRK.
January 12th, 2008 at 7:29 am
I’d be very careful about BIF.
—READ THIS—-
Boulder’s big appeal to investors is an 11% yield, which is to be paid monthly.
That’s an astonishing payout. Investors everywhere are desperately hunting for income. No wonder so many raced to buy.
The problem?
Sure the fund is sending you a check every month. But it isn’t income. They’re just sending you back your own money.
As Boulder conceded two weeks ago: “Currently the dividend consists mostly of a return of capital to stockholders. A ‘return of capital’ represents a return of a stockholder’s original investment in the Fund’s shares, and should not be confused with a dividend yield.”
Who built this income policy? The Acme corporation?
I spoke to Boulder spokeswoman Nicole Murphey to find the reason for this bizarre behavior. She explained that shareholders had voted for this fund’s dividend policy a year ago.
The reason? Back then, the fund’s shares were trading far below their value. So returning capital made sense.
The problem is that the plan worked so well that the shares stopped selling for a lot less than they were worth, and started selling for a lot more. Yet here they are, still handing back capital every month.
Murphey says the dividends came from income and a return of capital. The proportion of each varied month to month. Right now, she conceded, it was mostly just a return of capital.
But it doesn’t stop there. In fact, the mind-bending nature of this cartoon only gets revealed in the final act.
Because the shares are now so valuable, Boulder announced last month the fund is going to … sell more of them. It announced a “rights issue,” which will allow investors to subscribe for extra shares.
Yes, that’s right. Boulder is simultaneously handing investors back their cash and asking them … for more cash.
This may be excellent news for Boulder Investment Advisers. They get a fee based on the total assets. But it’s hard to see why shareholders would pony up. In fact, it’s hard to see why they should hang around in this fund at all. There are cheaper ways to have a laugh.
January 31st, 2008 at 6:29 am
Welcome to the club, I’ve been able to accumulate a handful of the “B” shares through purchases at Sharebuilder.com, where they allow the purchase of partial shares. For quite some time I made monthly purchases of $400 (at a $4 commission), which is much easier than trying to figure out how to find almost $5k to put down all at once.
As far as Warren not being around forever, believe me when I tell you that there are people ready to step in when he steps down.
BTW, if you are indeed looking to live off dividends then you may wish to check out DRiPInvesting.org, where you can find a community of people seeking exactly that through dividend reinvestment programs.
February 10th, 2008 at 6:52 pm
On the subject of Class B shares being easier to sell in smaller chunks… if you owned a Class A share and needed a portion of the money, you could convert it to 30 B shares and sell some.
From Bershire’s website:
“Each share of a Class A common stock is convertible at any time, at the holder’s option, into 30 shares of Class B common stock. This conversion privilege does not extend in the opposite direction.”
April 22nd, 2008 at 1:40 pm
Are you still planning on going to the Berkshire Meeting next weekend? My dad and I are going. I’m really looking forward to it. I have been a shareholder since early 2007, but have followed Buffett for years.
May 4th, 2008 at 6:55 am
Is there anyone here who can tell me how Sharbuilder.com works to buy one B-class (BRK-B)?
George L Smyth, can you kindly respond to me?