Berkshire Hathaway Is A Great Investment
Despite The Departure Of David Sokol
The Dynamic Wealth Report
April 5, 2011
by Corey Williams, Editor
“At least give me a clean death. A soldier’s death.”
You may recognize that line from one of my all time favorite movies…
Gladiator. The film won the Academy Award for best picture in 2000. So
I’m assuming you’ve seen it…
It’s a great scene. I still get chills when I watch it.
-------------Sponsor-------------
Where Can You Turn $300 Into $1.3 Million Right Now?
Our own small-company specialist, Robert Morris, has found a
way to 'sniff out' tiny penny stocks on the verge of a major breakout. And
the timing for this has never been better.
You see, the system takes advantage of an obscure SEC regulation that
sends penny stock prices through the roof.
We've seen some stocks gain 852%... 5,450%... even 17,496% in no time
flat.
Click here
for the details...
-----------------------------------
In it our hero Maximus, a well respected Roman General, is about to be
executed at the behest of the new Roman Emperor.
An executioner is about to behead Maximus before he requests “a
soldier’s death”. The Emperor’s guard grants his request for a clean
death. The executioner moves into position to stab instead of behead
him.
It was a sign of respect. It allowed honorable foes to die with their
head and dignity intact.
I think there was a modern day equivalent of a “soldier’s death” in the
world of finance at Berkshire Hathaway (BRK-A) last week.
You see, one of Warren Buffett’s top executives, David Sokol, was
allowed to resign amid accusations of insider trading. Apparently, Sokol
bought millions of dollars worth of Lubrizol (LZ) stock before he
pitched the buyout to Mr. Buffett.
And he held onto the Lubrizol shares after Mr. Buffett decided to
purchase the company. LZ jumped 30% when Berkshire announced the buyout. And Sokol pocketed a cool $3 million.
This situation screams insider trading!
It certainly looks like he was front-running the stock. But apparently,
since Sokol bought the shares before Berkshire was considering the
proposal, he didn’t violate the letter of the law.
Then Sokol abruptly announced he was leaving Berkshire to “invest his
family’s resources”. (At least he has an extra $3 million to get him
started on the right foot!)
So far Mr. Buffett has been supportive of his “general” in public. He’s
allowed Mr. Sokol’s departure from Berkshire to appear as if it was
Sokol’s choice to leave.
But I don’t buy it…
I think Buffett fired Sokol. Then, out of respect for his service, Sokol
was given a “clean death”. Buffett allowed him to leave Berkshire with
his dignity.
Remember, Warren Buffet values his integrity above all else.
In one of the many books written about him, he’s quoted as saying, “Lose
money for my firm, and I will be understanding. Lose a shred of
reputation for the firm, and I will be ruthless.”
Clearly this situation has hurt Buffett’s and Berkshire’s reputation.
So, where’s the ruthlessness?
The only explanation is Buffett truly doesn’t believe Sokol broke any
laws. However, he had to part ways with Sokol due to the appearance of
impropriety. Hence, the “clean death”.
One thing’s for sure, it has opened Warren and his company up to
criticism. And Moody’s (MCO) didn’t waste any time before weighing in on
the subject.
They said "a senior officer with the appearance of a conflict of
interest, may give rise to burdensome regulatory/legal investigations,
and raise questions regarding Berkshire's risk controls”. Yet the credit
rating agency left the company’s rating unchanged.
I’m sure everyone at Moody’s is getting a big kick out of this one.
Don’t forget, Berkshire was Moody’s largest shareholder before the
financial crisis. But since then, Buffett’s been selling shares of MCO
like clockwork.
He cut his position in MCO down from around 20% in the mid 2000’s to
about 12% today. And he continues to sell millions of shares every
quarter.
So let me get this straight… I’m supposed to believe a negative jab
about Berkshire from a company whose stock Buffett’s been selling for
the last two years?
Give me a break… Moody’s has no credibility here (if they do anywhere
these days).
The bottom line is Berkshire is what it has been for the last decade. In
other words, it’s a rock solid investment that will outperform the S&P
500 over the long run.
Don’t let any of the negative spin change your opinion about the stock.
Any selloff or dip should be treated as a buying opportunity.
Buffett let one of his greatest generals walk away with his dignity. I
have no doubt that if any laws were broken, we would have seen a bit of
the Buffett ruthlessness. BRK-A or the lower priced BRK-B are still
great investments. Take a look at adding them to your portfolio.
IPO investors jumped all over Qihoo 360 Technology
(QIHU) this week. The China-based security software company raised $175
million. The IPO priced at $14.50 and finished the day at $34. A massive
one day return of 134%.
Share This Story:
Print
Page
Bookmark Us
Home | Whitelist Us |
Terms of Use |
Privacy Policy |
Contact Us | Security |
Site Map