Berkshire Hathaway Inc. (BRK.B), And Seven Reasons to Sell The Stock

Page 1 of 2

When I was asked to write this piece for our ongoing series on Berkshire Hathaway Inc. (NYSE:BRK.B)‘s annual meeting, I struggled to come up with seven legitimate reasons to sell the Omaha, Neb.-based company. After thinking it over, however, I believe I’ve drawn up a list of factors that fits the bill. To be clear, there’s little about Berkshire Hathaway Inc. (NYSE:BRK.B) that leads me to believe it’s a “sell” right now. But that’s not to say this won’t change in the not-too-distant future.

Berkshire Hathaway Inc. (NYSE:BRK.A)1. Warren Buffett
If Buffett had it his way, he’d probably run Berkshire Hathaway Inc. (NYSE:BRK.B) forever. But he doesn’t. And in last year’s annual letter to shareholders, the Oracle of Omaha assured investors that the board of directors has not only picked a successor (“an individual to whom they have had a great deal of exposure and whose managerial and human qualities they admire”) but that they’ve identified two “superb backup candidates” as well.

This may be so, but the fact remains that Berkshire Hathaway Inc. (NYSE:BRK.B) won’t be the same without Buffett. Aside from his ethereal ability to grow and manage an increasingly massive conglomerate, Buffett has become a magnate for deals. When Solomon Brothers fell on hard times, who’d they call? When Long-Term Capital Management nearly imploded, Buffett was among the first to offer assistance. And when Goldman Sachs Group, Inc. (NYSE:GS) and Bank of America Corp (NYSE:BAC) needed to reassure the market of their respective solvencies, it was Buffett who came to the rescue.

The point is that people go to Berkshire Hathaway Inc. (NYSE:BRK.B) because of Buffett. This is equally true for companies that are looking to sell as it is for companies like Goldman Sachs Group, Inc. (NYSE:GS) and Bank of America Corp (NYSE:BAC) that simply need a temporary stamp of approval. And, in return, Buffett ensures that Berkshire Hathaway Inc. (NYSE:BRK.B) is more than adequately compensated for any offer of assistance.

2. Size
Success can be both a blessing and a curse. The blessing comes on the way up, as companies establish themselves, gain momentum, and grow at spectacular rates of speed. But at some point, they become so large that the growth rate necessarily decelerates. We’ve seen this with the greatest of American companies recently, including Chipotle Mexican Grill, Inc. (NYSE:CMG) and Apple Inc. (NASDAQ:AAPL). And Berkshire is no exception.

What started as a modest textile business has grown into one of the largest industrial conglomerates in the world. It’s the fifth largest publicly traded company in the United States by market capitalization, behind only Exxon Mobil Corporation (NYSE:XOM), Apple Inc. (NASDAQ:AAPL), Google Inc (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), respectively. In his most recent letter to shareholders, Buffett acknowledged the pressure this puts on Berkshire’s growth through acquisition strategy: “Because of our present size, making acquisitions that are both meaningful and sensible is now more difficult than it has been during most of our years.”

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

The 10 Longest Wars of All Time

The 13 Worst Looking Foods that Taste Great

The 6 Most Gruesome Injuries Suffered During a Sports Match

The 20 Biggest Contracts in MLB History

The 7 Worst Blown Calls in Sports History

7 Free Ways to Advertise Your Business Online

The 18 Best R&B Songs of the 90’s

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!