Active Trader Update
Berkshire Still Looks Cheap
By Jonathan Edwards
RealMoney.com Contributor
10/27/2006 7:43 AM EDT
URL: http://www.thestreet.com/markets/activetraderupdate/10317932.html

This column was originally published on RealMoney on Oct. 26 at 9:19 a.m. EDT. It's being republished as a bonus for TheStreet.com readers. A major event happened Monday that was, in my mind, largely overlooked by most of the financial press. For the first time, Berkshire Hathaway's (BRKA) Class A shares closed above $100,000 a share. The stock had previously traded above that level four times -- the first being Oct. 5 -- but Monday represented the first-ever close above the century mark. Despite the record high nominal price, I actually believe the company is pretty cheap at these levels and should be a core holding in any value investor's portfolio. It is now trading at only 1.6 times book value, a discount to other large insurers like American International Group (AIG) , which trades at 2 times book (and is also very cheap, in my opinion). Berkshire is sitting on more than $40 billion in cash and cash equivalents, and the company produces more than $10 billion in free cash flow a year to add to its coffers. With an unusually weak hurricane and tornado season, I expect very positive results when the company reports earnings. The $100,000-per-share price tag makes investing in Class A shares prohibitive for most investors, but the Class B shares, which represent 1/30th of a Class A share, should be affordable to most. Even if you don't believe the stock is cheap, consider buying a single share, as it gets you an invitation to the company's annual meeting. The event is sometimes known as the "Woodstock of Capitalism," and the lessons learned from listening to Warren Buffett and Charlie Munger are easily worth the price of admission.

In keeping with TSC's editorial policy, Jonathan Edwards doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Edwards is a research analyst at TheStreet.com, where he works with Jim Cramer on Action Alerts PLUS. He follows the health care, consumer and financial sectors, with a focus on value stocks. Edwards appreciates your feedback; click here to send him an email.