By Matt Phillips
January 27, 2010, 7:56 AM ET
Baby Berkshires are getting bid up in premarket trading, after Tuesday’s announcement that the class B shares in Warren Buffett’s iconic company will replace shares of Burlington Northern Santa Fe in the S&P 500 stock index. The Journal’s Scott Patterson reports:
Berkshire’s addition to the index means fund managers who track it will need to rush to buy shares. Many index funds controlled by money managers, such as Vanguard Group, are benchmarked to holdings in the S&P 500, a broad gauge of corporate America. S&P estimates that more than $3.5 trillion in assets are held in investment funds, including index funds, tied to components of the S&P 500.
Previously, Berkshire Hathaway shares had been excluded from the S&P 500 because their high prices cut down on how often they were traded. But that changed when shareholders approved a 50-1 stock split of its Class B shares last week as part of Berkshire’s deal to buy railroad Burlington Northern Santa Fe Corp. last year, likely making the shares more liquid. Berkshire will replace Burlington Northern in the index, as well as in the S&P 100 index. As far as a hard date for the actual addition, that’s yet to be announced.
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