By Steve Jordon
WORLD-HERALD STAFF WRITER
Berkshire Hathaway Inc.’s B stock is being traded like a bouncing high-tech stock, given its double-the-market-price rise since last fall and the 600 million shares that have changed hands since the stock split 50-1 a month ago today.
Berkshire announced plans in November to split the stock so that small shareholders of Burlington Northern Santa Fe Corp. would get the same tax treatment as the big investment houses.
Berkshire Chairman Warren Buffett hopes investors would continue to own Berkshire shares as a worthy long-term investment, rather than as a newly “cheap” piece of paper to be bought and sold based on temporary price blips.
Since the day of the split’s announcement, Berkshire’s Class B share price is up 18.4 percent, while broad benchmarks of the market are up between 6.1 and 7.6 percent.
Today, millions of people hold stakes in Berkshire, the Omaha-based investment company that Buffett started more than 50 years ago by persuading a few dozen friends and family members to let him manage some of their money.
Most of today’s owners are indirect holders, investing in mutual funds that, in turn, own shares in each of the stocks in the Standard & Poor’s 500 stock index.
Feb. 12, Berkshire acquired Burlington Northern and replaced it on the S&P 500, a change that triggered purchases by the index funds. That day, $28 billion in Berkshire A and B shares changed hands, an apparent record for a U.S. company.
The number of direct Berkshire owners jumped as Berkshire exchanged about 80,900 new Class A shares and 21 million new Class B shares for Burlington Northern stock. Those shareholders specifically requested stock instead of cash, so one would expect them to hold onto those new shares for a while.
So it’s not easy to pinpoint how much of the trading is by investors whose minds are set for quick profits rather than the long-term value that Buffett espouses.
The volume of B shares may be artificially high right now, partly because of the S&P effect, partly because of the Burlington Northern purchase and partly because of the novelty of the lower-price Berkshire shares. Just because B shares sell for the price of a fancy dinner for two, rather than the price of a family vacation in Disneyland, the same company stands behind the stock, and its performance depends on the same factors.
$1.7 million boost
The Greater Omaha Chamber of Commerce says this month’s 50-minute conversation by Buffett and former Treasury Secretary Henry Paulson at the chamber’s annual luncheon was worth $1.7 million in advertising for Omaha.
The total is based on audiences for live national cable and Internet video feeds, later replays and stories in hundreds of newspapers, broadcasts, magazines and on-line web sites, tracked by Universal Information Services.
Chamber CEO David Brown said the event “reinforces the great opportunities Omaha offers the business world.” The 2,440-person audience included some clients who may locate or expand in the Omaha area, Brown said. “They got to experience first-hand the vibrancy of our community’s diverse economy.”
Feeding shareholders
Piccolo Pete’s restaurant is now open on Sundays, and that’s one reason Berkshire listed the restaurant at 2202 S. 20th St. in the official agenda for the company’s annual shareholder-fest.
The phone has been ringing with out-of-town callers making reservations for Sunday, May 2, the day after Berkshire shareholders meet in Omaha. The official agenda designates Sunday as “shareholder steak night.”
Buffett has long listed Gorat’s Steak House as the official Berkshire steak location, touting its T-bone steaks and hash browns. This year the agenda lists both restaurants. At other times during the year he treats college students to lunch at Piccolo Pete’s, which has a large dining room to accommodate the groups of 150 or so students.
“We’re all for it,” said Dennis Graves, whose wife, Dee, and sister-in-law, Donna Sheehan, own the restaurant.
Sheehan said Buffett came into the restaurant a few years ago, and his wife, Astrid, suggested the restaurant could serve root beer floats, one of Buffett’s favorites. Now it’s on the menu, and the restaurant also will stock up on steaks to feed shareholders.
The restaurant has drawn quite a few Berkshire shareholders in recent years as word spread, Sheehan said. “We’re thrilled to be on the agenda.”
‘Huge setback’
Buffett associate and Microsoft founder Bill Gates, who lists himself as full-time co-chairman of the Bill & Melinda Gates Foundation, says the 2007-2009 global recession was “a huge setback.”
“The neediest suffer the most in a downturn,” he said in his second annual letter on the foundation’s behalf, noting that 2009 began “with no one knowing how long the financial crisis would last and how damaging its effects would be.”
“Looking back now, we can say that the market hit a bottom in March and that in the second half of the year the economy stopped shrinking and started to grow again. I talked to Warren Buffett, our co-trustee, more than ever (in 2009) to try to understand what was going on in the economy.
“Despite the tough economy, I am still very optimistic about the progress we can make in the years ahead,” with the foundation’s emphasis on education, poverty and health issues.
Gates noted in his annual letter as chairman of Microsoft that the computer software company received a AAA credit rating last year, “becoming the first U.S. corporation in a decade to be assigned S&P’s highest rating.”
Gates also serves as a director of Berkshire, which lost its long-standing AAA credit rating recently.
PacifiCorp
Fisherman, Native Americans, state and federal government officials and Berkshire subsidiary PacifiCorp signed agreements last week that would remove four hydroelectric dams from northern California and Oregon, a step toward resolving issues involving salmon spawning grounds, irrigation and electrical power in the region.
The Associated Press reported that PacifiCorp would not bear the estimated $450 million cost of removing the dams, a process that would start in 2020 and also depends on funding and further government approval. PacifiCorp customers would pay surcharges, and California voters will be asked to approve a $250 million bond toward the cost.
PacifiCorp CEO Greg Abel of Des Moines said the agreements fulfilled the company’s two goals of finding a balance fair to all the parties and protecting the interests of the utility’s 1.6 million customers.
The agreements also lay out how water from the Klamath River will be used for farming, for salmon runs and other issues.
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