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
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

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!