(BN) Berkshire Surges After Being Picked to Join S&P 500

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Berkshire Surges After Being Picked to Join S&P 500 (Update1)
2010-01-27 13:34:29.327 GMT


    (Updates shares in the second paragraph, increase in value
of Buffett's stake in the fifth.)

By Andrew Frye
    Jan. 27 (Bloomberg) -- Warren Buffett's Berkshire Hathaway
Inc., which split its stock 50-for-1 last week, rose in early
trading after being picked to join the Standard & Poor's 500
Index yesterday.
    The Class B stock jumped $5.90, or 8.7 percent, to $73.90
at 8 a.m. in New York. The Omaha, Nebraska-based company will
replace Burlington Northern Santa Fe Corp. in the index after
completing the takeover of the railroad, S&P said in a statement
after the close of regular trading yesterday.
    Buffett split the Class B shares as part of the $26 billion
railroad acquisition. That brought Berkshire's stock below $75,
making shares available to a larger group of investors and
increasing the trading volume. Buffett told investors at a
Jan. 20 meeting that joining the S&P 500 may prompt index-
tracking fund managers to buy up to 7 percent of Berkshire.
    "There's going to be tremendous buying demand because of
this inclusion," said Glenn Tongue, a partner at T2 Partners
LLC, which owns Berkshire shares. "That's a catalyst for the
stock."
    Funds that track the S&P 500 have about $1 trillion in
assets, according to David Guarino, a spokesman for S&P in New
York. The early trading boosted the value of Buffett's personal
Berkshire stake, which includes Class A and Class B shares, by
$3.68 billion since yesterday's close. The company has gained 11
percent since the share split was approved on Jan. 20.

                     'Smarter Than Anyone'

    "There's Buffett, who's proven he's smarter than anyone
else," said Peter Sorrentino, a senior portfolio manager at
Cincinnati-based Huntington Asset Advisors, which oversees $12.8
billion. Berkshire "is a stock that belongs in the S&P 500."
    Buffett, the 79-year-old Berkshire chairman and chief
executive officer, is welcoming a broader base of investors to
the firm he built in the past four decades. Traders and equity
analysts have long paid Berkshire less attention than other
companies of similar size because of its elevated share price
and relatively stable investor base, led by Buffett who owns
roughly a quarter of the stock. Berkshire's Class B traded as
high as $3,340 the day before the split took effect.
    "I can't imagine another stock that's more deserving of
being in the S&P," said Michael Yoshikami, chief investment
strategist at YCMNet Advisors, which holds Berkshire shares.
"It will naturally have higher demand from the index funds."

                     Investing 'Forever'

    Berkshire's Class A shares advanced $9,249, or 9.1 percent,
to $111,000 late yesterday and hadn't traded by 8 a.m. today.
The firm, which was valued at about $158 billion as of
yesterday's close, has advanced more than 10-fold over the last
two decades.
    Buffett says his ideal investment horizon is "forever."
Berkshire is the biggest shareholder of Coca-Cola Co. and
American Express Co., and Buffett has held those stocks for more
than two decades even as both trade below their top prices in
the 1990s. He's recorded multibillion dollar gains for Berkshire
on investments in Capital Cities/ABC Inc. and PetroChina Inc.
    Index funds may give Berkshire shares stability, Buffett
told shareholders last week.
    "You've got a permanent stockholder for 6 or 7 percent of
your shares," Buffett said. "We like permanent shareholders.
That's exactly what we're looking for."

For Related News and Information:
Largest Class B shareholders: BRK/B US <Equity> PHDC1 <GO>
Berkshire price ratio analysis: BRK/A US <Equity> FA PRA <GO>
Table of largest Berkshire acquisitions: NSN KSJNB207SXKX <GO>
More on Buffett: BIO WARREN BUFFETT <GO>
Top deal news: DTOP <GO>

--With assistance from Lynn Thomasson, Rita Nazareth and Nikolaj
Gammeltoft in New York. Editors: Steve Geimann, Erik Holm.

To contact the reporter on this story:
Andrew Frye in New York at +1-212-617-4652 or
afrye@bloomberg.net.

To contact the editor responsible for this story:
Dan Kraut at +1-212-617-2432 or dkraut2@bloomberg.net.

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Bertrand Clausell Wanclik (GMAIL)
http://trendsniffer.blogspot.com
http://kuizine.blogspot.com
http://www.linkedin.com/pub/0/b55/631  
+55 11 9955-6390
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