Why I Hate Warren Buffett!
The Dynamic Wealth Report
August 19, 2009
Why I Hate Warren Buffett
I spend a good portion of my day on the computer. I’m constantly
researching investment techniques, studying trading ideas, and watching
trends. My research is like wandering through the basement of the
Smithsonian. When you open a drawer, you never know what you’ll find.
Sometimes it’s nothing… sometimes it’s a pot of gold.
I recently stumbled across a pot of gold. I discovered a website with
copies of old letters from Warren Buffet to his partners. These were
written before Buffett took over Berkshire Hathaway. They were penned
long before he was held up as the greatest investor of all time.
The letters were written between 1959 and 1969.
I’ve been studying them closely with great fascination. I’ll be sharing
the insights I’ve gleaned from a young Warren Buffett soon. But those
articles will have to wait for another day…
Today, I’m here to tell you why I hate Warren Buffett.
Hate is a strong word, I know. But there are a few things about Buffett
that everyone should hate. Number one on my list is Buffett’s stubborn
attitude.
It may have made him rich, but for you and me, it’s a thorn in our side.
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Here’s my beef. Buffett refuses to split the stock of Berkshire
Hathaway. He’s stubborn and refuses to do it.
For those of you who don’t know, the management of a company can easily
change the number of shares outstanding. All it takes is board and
sometimes shareholder approval. It’s easy to do. It’s just a little
paperwork.
The impact to a company is minimal. Let me give you an example…
Let’s say a company’s stock trades for $100 per share and they have 1
million shares outstanding. The company has a value of $100 million
($100 times 1 million shares). Management decides to split the stock 2
for 1 (we’ll get to why in a moment).
Here’s what happens to the stock. Right after the split, the stock will
be valued at $50 per share, but there will be 2 million shares
outstanding. So if you owned 100 shares, after the split you’d own 200.
Now, you’ll note the value of the company hasn’t changed. It’s still
worth $100 million.
So why split the stock?
There are a lot of reasons. The number one reason is to keep it affordable
for new investors.
Many companies try to keep their stock price between $20 and $100 a
share. That way the average investor can buy stock without a struggle.
Buffett doesn’t care about the little guy… or the new investor. Just
look at his stock price. Berkshire Hathaway (BRK-A)… go ahead, try it. Type it in and get a quote. If you’re like most, you’ll stare at the
computer screen and wonder how a typo like that could occur.
Trust me, it’s not a typo. Right now as I write this, the price of one
share of Berkshire Hathaway stock is $100,163. Yup, over one hundred
thousand dollars. I know people who have been saving all their life and
don’t have $100,000 in cash to put into a single stock.
One share of Berkshire is more than the price of a house in some areas.
Seriously. What’s the average investor to do?
If you start out investing in an IRA, you might have $2,500 or $3,000 to
start (if you’re lucky). Not a chance you’ll be investing in Berkshire
stock any time soon… thanks Warren.
Now, some people will note that Berkshire trades a “B” class of shares. Right now they’re trading for over $3,000 a share. That’s a little
better, but it still puts investing in Berkshire out of reach for the
average investor…
Why doesn’t he split the stock?
Why doesn’t he make it easier for new investors to buy?
Warren claims he doesn’t want to split the stock because he doesn’t want
“traders” owning it. He only wants long term investors.
No problem Warren… I’m ready, and I’m sure thousands of others are ready
too. I’m willing to sign up and buy stock right now. And I promise to
hold it forever. (Well, I might sell when you die… but you’ll be dead and
probably won’t care.)
Thousands of us are ready to buy and profit from your investing wisdom…
just give us the opportunity.
Remember, the median household income in the USA is just over $50,000. Why would you require everyday Americans to try and save
two years worth
of income (never mind taxes and other expenses) just to buy a single
share of Berkshire Hathaway stock?
Americans need to start saving for retirement today… not in two or ten
years. What better way than investing in the stock of Berkshire
Hathaway?
Warren, be a man. Split your stock.
Just in case Warren ignores my pleas, there is another way you can
invest with Warren. Take a look at the Sequoia Fund (SEQUX). Berkshire
Hathaway makes up more than 20% of the fund. It’s not a perfect way to
get exposure to Warren’s greatest hits, but their minimum investment is
only $2,500. After getting a piece of the fund, you can invest as little
as $100 thereafter.
• Oil (Over $70 a barrel)
Just this morning, EIA data shows that oil consumption in the US is
moving higher. Many traders were expecting a buildup of storage… what we
got was a draw down. Prices jumped on the news… can $80 oil be far
behind?
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