Are the Days of Riding Buffett's Coattails Ending? Maybe Not

Now that Burlington Northern (BNI) is up 30% on a takeover by Warren Buffett’s Berkshire Hathaway (BRK.A), some people have sent in congratulations for recommending the stock in a May 4, 2009 blog post. Thank you very much but I didn’t see the takeover coming; I was thinking it could take two or three years for Mr. Market to bid it up that high.

And it wasn’t really a recommendation: It was more of a reporting piece that observed BNI seemed to be Buffett’s “one best idea” judging from how big his recent acquisition of shares had been. Indeed, anytime I personally recommend a stock, you best run in the opposite direction, or at least view it with a healthy dose of skepticism — remember those past posts on Nortel Networks (NT) anyone?

Anyway, with Buffett now approaching 80, there may not be too many more “one best ideas” to cull from Berkshire Hathaway’s regulatory filings, regrettably. The days of riding Buffett’s coattails would seem to be near their end.

Then again, Buffett’s bold move could signal he is intent on deploying the mountain of cash in Berkshire Hathaway’s coffers before he leaves the helm. Rather than just leave it sitting there for his successors to possibly fritter away, he may be thinking he can do it better (and leave his life’s work on a more secure foundation).

The Burlington Northern deal will claim close to 60% of Berkshire Hathaway’s cash hoard — leaving $9 billion (U.S.) on the balance sheet (using figures from Richard Beale of breakingviews.com). So there could be a few more ideas flying out those regulatory filings over the next few quarters (with the third-quarter report due out mid-Nov.).

Comments

[Roger Knights:]

"leaving $9 billion (U.S.) on the [Berkshire] balance sheet .... So there could be a few more ideas flying out those regulatory filings ..."

Maybe he'll pocket Lionel as well. Choo-choo!

Nov 05 11:09 AM

[a. palmer jr.:]

I don't pay a bit of attention to what Warren Buffett buys and doesn't buy.....but then again, I'm not rich either.

Nov 05 03:11 PM