Berkshire Hathaway Activity Worth Monitoring

“Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.” These words of wisdom from billionaire investment guru Warren Buffett may be particularly useful if the market weakens further.

One place a select group of investors like to put their money during times both good and bad is Mr. Buffett’s holding company, Berkshire Hathaway Inc. (BRK.A) But with its Class A shares trading above $100,000 each since October 2006, and now close to $135,000, they are clearly not for everyone.

The closely-watched holding company saw its stock climb roughly 28% between early-August and the end of 2007, while the S&P 500 was flat during that period, according to Citigroup’s Joshua Shanker.

The analyst initiated coverage of Berkshire recently with a “hold” rating and $147,000 price target. He expects earnings per share [EPS] of $10,500 in 2008, but thinks that even if that number is beat, the company’s valuation won’t likely be impacted much.

“In the face of a U.S. mortgage crisis, we believe Berkshire’s lack of credit exposure, global revenue positioning, bearish dollar stance and war chest of cash have drawn investors into the stock,” Mr. Shanker told clients in a recent note.

He also noted that continued interest rate cuts by the U.S. Federal Reserve could encourage buyout rivals and private equity groups to increase their activity. This would likely mean that Berkshire will continue to sit on cash.

Then there is the risk that investors may lose confidence in the company if Mr. Buffett is no longer in charge. While the illiquidity and high price tag of Berkshire shares has created a long-term shareholder base, Mr. Shanker thinks Mr. Buffet’s donation of stock to the Gates Foundation and plans to give his fortune to charity means stocks sales and increased liquidity are worth monitoring.