There is lots of talk about Berkshire Hathaway (NYSE:BRK.B) after Warren Buffett announced after the close Tuesday that he has been diagnosed with stage 1 prostate cancer. This has been the main topic for the talking heads, including Jim Cramer, and several fund managers with large Berkshire holdings.
Don't worry, prostate cancer will not kill Mr. Buffett. I wish that he has many more years. The negative here is that it is a wake up call reminding us that Warren Buffett is mortal, and he is currently 82 years old.
He has taken this company from nothing to one of the world's top corporations. Berkshire is a conglomerate with so many diverse divisions that include insurance, building materials, the nation's largest railroad, a jewelry store, a candy company, energy companies, newspapers, banks and a very large investment portfolio.
Talking heads have noted their estimates of the "real value" of Berkshire as being anywhere from 20% to 50% above its current price.
Well, you should wait. Yes, Berkshire has been a great company, but recently it has been quite an underperformer. Berkshire is flat for the last 12 months and the S&P 500 is up 6%. Over the last 3 years Berkshire is up 37%, but the S&P 500 is up 64%. The S&P yields over 2% while Berkshire pays no dividend.
One more question: Has anyone calculated the capital gains taxes the would be due if Berkshire began to liquidate its long term equity positions? My advice is to wait and see.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.