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June 20, 2011 at 02:00 PM
SmartMoney’s Dave Kansas writes about a proven stock trading at bargain basement prices that Warren Buffett would immediately snap up. It’s a little conglomerate known as Berkshire Hathaway, and the Sokol Affair, in part, has made it the value stock du jour. Kansas notes the stock touched a 52-week low on June 15, trades just above book value and has a long track record of delivering solid returns.
Berkshire hit $109,925, its lowest level since June 2010. It has since recovered a bit to trade above $112,000, but the shares are still down about 14% since a Feb. 28 high of $131,300. Berkshire's shares haven't traded below $100,000 since January 2010. Berkshire's B shares, which trade at about $75, have performed in similar fashion.
There are a handful of fundamental reasons that Berkshire shares have come down in value since February, Kansas writes. The company's large reinsurance business, which provides insurance for insurance companies, is facing headwinds after a round of natural disasters, especially in Australia, New Zealand and Japan.
In addition, Berkshire's stock holdings have a substantial concentration among financial stocks, including Wells Fargo, American Express, Bank of New York Mellon, MasterCard and U.S. Bancorp. That sector is the worst-performing among the S&P 500's 10 groups this year, down 7.35% year-to-date.
More difficult to measure is the impact of the so-called Sokol Affair. Earlier this year, Buffett lieutenant David Sokol, (left), resigned his position after it emerged that he had acquired a stake in Lubrizol, a company that he later successfully persuaded Buffett and Berkshire to acquire. Sokol said his resignation was not related to the share purchase and that he doesn't believe he did anything wrong.