Small investors can buy into Buffett at lower cost

[February 04, 2010]  OMAHA, Neb. (AP) -- Peter Eischeid has long had his nose pressed to the glass of billionaire Warren Buffett's investment empire, yearning to be among those with the means to buy their way in.

No more. Thanks to a stock split approved Wednesday, Eischeid and other small investors plan to snatch up lower-tier Berkshire Hathaway Inc. shares that will sell for just $69 and change. That's down from about $3,500 that each Class B share commanded before.

"I avoided that conglomerate mainly because of the entry prices of the shares," said Eischeid, 34, of Salt Lake City. "I know there are a lot of people that will definitely be intrigued by that lower share price."

There will indeed, said Andy Kilpatrick, a stockbroker and author of a two-volume tome on Buffett's life and business.

"It now makes it available to a child who cuts grass for spending money," Kilpatrick said. "There's nobody who can't find $66. The last time Berkshire stock was at $66 was in 1971."

Buffett has built his reputation as a savvy investor who spots quality businesses selling cheaply and either buys the stock or the whole company. Omaha-based Berkshire has investments in such companies as Coca-Cola Co. and Wells Fargo & Co., and owns more than 60 subsidiaries, including clothing, furniture and jewelry companies. Its insurance and utility businesses typically account for more than half of its revenue.

The company's prized Class A shares, which carry more voting rights and are not being split, are the nation's most expensive stock at around $100,000 each. The Class B shares, dubbed "Baby Berkshires," are splitting 50-for-1 as a way to facilitate the company's plan to buy Burlington Northern Santa Fe Corp.

Among investors drawn by the lower price is Adam Bray-Ali, a self-described small investor from Los Angeles, who bought two shares of the Class B stock for just under $3,300 each two days before the split, and planned to buy another 50 or so afterward. By the end of Thursday, he plans to have about 150 shares.

But there's more at play than the stock's new affordability.

"I can go to the shareholder meeting this year," the 35-year-old Bray-Ali said.

Berkshire's annual meeting is the mecca of shareholder events, routinely drawing more than 30,000 to Omaha for the three-day affair that has an almost carnival-like atmosphere. The event includes a shareholder reception on the eve of the meeting, various parties and a six-hour question-and-answer session with Buffett, who tosses out financial observances in terms even the most uninitiated investor can follow.

"I would say that for some young investor ... if you want to learn about investments, then the annual meeting is the place to go," Kilpatrick said.

That's a draw for University of Tennessee senior Nick Vantrease. The 21-year-old, who is president of the school's Financial Management Association, said he will consider buying Berkshire stock once he graduates in May and starts working. He expects the split to be a key topic at Buffett's scheduled meeting with college business students next month.

"It'll be interesting to hear what he has to say about it," said Vantrease. "It definitely makes the stock more affordable."

Terry Porter of Kansas City, Mo., who has held Class B shares for years, believes it's not just young investors who can take advantage of the lower entry price.

"I have a lot of older people ask me what they should invest in. They don't want to be ripped off," said the 60-year-old retiree. "I'd be the first to recommend Buffett."

Opinion is split on the effect the move will have on the stock's direction. Plenty believe it will help the Class B price rise, especially if Berkshire's increased liquidity lands the stock in the S&P 500.

Buffett, long opposed to stock splits, said he enjoys using stock for the railroad deal "about as much as preparing for a colonoscopy." While the man known as the Oracle of Omaha has nonetheless supported the move, some professionals don't see it as a buying opportunity.

"I'm a follower and fan of Warren Buffett, but no, I am not going to buy into Berkshire Hathaway for myself or my clients," said Mark Pearson, president and CEO of Anchor Capital Management in Minneapolis. "I firmly believe there is greater value in other companies in the market."

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On the Net:

Berkshire Hathaway Inc.: http://www.berkshirehathaway.com/

[Associated Press; By MARGERY A. BECK]

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