The pros and cons of buying a $200,000 stock

A piece of Berkshire Hathaway costs nearly as much as an average home mortgage. Is it worth a buy?

By InvestorPlace Aug 15, 2014 1:48PM

Credit: © Jim Thompson/Newscom/ZUMA Press
Caption: A Berkshire Hathaway sign is seen in Albuquerque, NM.By Lawrence Meyers


Well, Warren Buffett has gone and done it.


Berkshire Hathaway's Class A shares (BRK.A) topped the $200,000-per-share level for the first time this week, putting a single share of BRK.A stock just under the level of your average home mortgage.


Now seems as good a time as any, then, to talk to the investing world's well-heeled and discuss the prospects of owning such an elite product.


Here are the pros and cons of owning Berkshire Hathaway at the bargain price of $200,000 per share:

Pro: There is no greater stock to own

Berkshire Hathaway is what I consider a "forever hold" stock. You can feel good and safe holding it for at least the next 30 years, at which point Warren Buffett will surprise the world by revealing he is, in fact, Methuselah. You also are holding a diversified conglomerate that has assets in just about every sector of the American economy, all managed by a guy who seems to generally know what he's doing when it comes to buying companies.


Con: The easy money has been made

I can't say this for sure, but after rising from $245 in 1980 to $202,000 today, that's something like a gazillion percent gain in 34 years. The market cap is $324 billion. Suffice to say, I don't think this dog will more than triple in the next 30 years.


Pro: One share costs $200,000

It prevents the rabble from owning a piece of the kingdom.


Con: One share costs $200,000

It prevents you from owning a piece of the kingdom.


Pro: You can buy B shares for $135

You can own a piece of the kingdom after all.


Con: You can buy B shares of $135

You are really nothing more than a serf. Basically, you are a second-class citizen hoping to pick up the scraps thrown from the King's carriage as he passes. You get no vote. You feel like a freeloader.


Pro: BRK.A will never split

You just keep watching the share price go up and up and up.


Con: BRK.A will never split

You'll never see that one share multiply into 1,000 shares in a 1,000-to-1 split.


Pro: You feel rich just by owning one share

What could be better than seeing a six-figure holding in your stock portfolio?


Con: You feel poor in a crash

If the market crashes by 50 percent as it did in 2009, you are going to feel the pain as that large number becomes much, much smaller.


Pro: You get to go to the annual meeting

Apparently, the Berkshire Hathaway annual meeting pass is one hot ticket. You get to see some old rich guy and his old rich colleagues talk about how great their company is. You get free candy, or something. You get to sit in a room with other cultists and ask a question of the old rich guy and feel as if you've arrived at some great moment in your life.


Even better, he'll answer in vague phrases about "buying value," "never selling" and "stocks are a good deal" . . . but never say anything specific.


Con: You have to go to Omaha

No dig against Omaha, but it's Omaha. You probably didn't get a direct flight. You probably had to overpay for your hotel room and ride from the airport. It's really flat. There are a lot of cornfields.


More from InvestorPlace

As of this writing, Lawrence Meyers was long Berkshire Hathaway. Uh... the B shares.

11Comments
Aug 15, 2014 4:02PM
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It's just a nondividend paying mutual fund.
Aug 16, 2014 9:18PM
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I think it's a good thing to have something as useless and anti-American as a "fund" worth that much per share. It makes a much louder POP when we crash and shareholders rich enough to have them will likely kill themselves in spectacular psychopathic ways.

This is an era worth ending as soon as possible so the rest can progress. 
Aug 15, 2014 4:37PM
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The last part of this article is just plain ignorant.  I get the perception of Omaha and would have no problem with the author stopping after the sentence about overpaying (which is true) but to say it is really flat and there are a lot of cornfields is just stupid.  The city isn't flat, the next 300 miles west on the Interstate definitely are.  And yes there are a lot of cornfields outside the city, but in my experience many cities have boring landscapes once you actually leave the city.
Aug 18, 2014 11:05AM
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Back in 2007-2008,.... BERK.A  lost a lot of money...

If you want to get in on the Berkshire merry-go-round, you could do it cheap with BERK.B.

The yearly meeting, is considered to be the "Woodstock" of the Financial World..

You have to get tickets to enter, if they cost a little; They are not worth it; Listen to the transcripts..

(we have never paid to get into a shareholder's meeting)

They may have "free candy", but believe they give away "free" Dairy Queen ice cream; Which Berkshire or Buffet owns..


Omaha, is not a hick, cow-town (although use to be); The prices of hotel/motels double and triple when the BERKlice are in town..(that makes Warren mad). They do have a few Airports there.

And they are on, one of the business cross country hi-ways....I-80 east-west. 

Omaha and Council Bluffs are nice towns, and a good place to raise a family or kids..

And a lot of Millionaires live in and around the area...close to their money.


On a trip to Denver one time, our Van or SUV broke down with a brake problem, in or near town.

We stopped at a Station/Garage after crossing the River...

They said they could the fix problem...We went a couple doors down, and the family had lunch...

About 2 hours later, we had everything fixed, less then a $100 dollars (that included lunch) and we were on our way.

Everyone was very nice to us....Good people.


Only thing I know about Nebraska today...Is they are holding up the building of the Keystone XL pipeline expansion through the State...Environmental and Landowner's disputes, along with a Lawsuit against the Governor; Something about Constitution and State's rights.

 

Warren doesn't have anything to do with it, BECAUSE he will/would benefit either way; Whether it is built or not...Uninformed or uneducated people seem to think he is involved.

That's why they are the UN-learned...

Kind of like Horses and water...

Aug 15, 2014 4:44PM
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This idiot writer has never been to Omaha. 
Aug 16, 2014 9:17PM
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The Dow dropped 40 points in 10 minutes. Anyone else speculate that we need our Armed Forces to shutter the Federal Reserve right now?
America has been reduced to a gambling casino for Kool Aid addicts. We don't do anything except ruin the nation through market games. 
Maybe Hitler had the right idea.
Aug 15, 2014 6:54PM
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The number one reason why you don't buy this Stock, Warren Buffett
Born: August 30, 1930 (age 83). Folks have no idea how those that takeover will perform and Warren is hardly a young pup.

The number two reason why you don't buy this stock, it doesn't pay a dividend yet is trading at an all time high. By the time we have another Bear then Bull, Warren likely won't even be running the show.

Folks, you can't mimic the Deals that Warren has done and thus the performance. Those that have a clue to the type of special Deals he has pulled off during the Great Recession, understand that all too well. If you are going to buy a stock trading at a all time High at least buy one paying a Dividend and has a strong CEO that's far younger.

You don't buy and hold forever any stock when the Global Feds have gone insane and you certainly don't buy and hold forever a stock when the guy running the SHOW is almost 90.

Aug 15, 2014 3:39PM
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The "short answer" is NO...!!!


Consider how priced out "A" is, because of it's holdings being at the "top of their game"..

And maybe seriously overvalued...??

Aug 15, 2014 5:21PM
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tax.....cpa. That is correct you never make a dime on BERK unless you sell...


Some, or maybe many "tout" that they own BERK, just to sound important.


I would much rather "duplicate" "some of his and other's "successful holdings", which we have; Along with our own choices....

That in essence allows us to reap some of benefits or dividends that BERK gets...


We built our own Mutual funds in different accounts, and a diversification of Equities...

If anyone likes BERK that well, they should just duplicate it in their own holdings..

But be careful, Buffet and Munger have made some mistakes or poor choices also...

*** And yes...Very true, we can't make the special deals they get sometimes.

Aug 15, 2014 9:30PM
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Just a guy with.....

I agree going through 200-300 miles of corn or wheat fields can be a little boring...

But driving through a big city and/or the by-pass around one, ISN'T much BETTER...!!!

Nothing like having someone cut you off or yelling at you...When you are right.

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