by millionairemind » Fri Jan 29, 2010 8:52 am
Published January 29, 2010
Berkshire surges after joining S&P 500 Index
(NEW YORK) Warren Buffett's Berkshire Hathaway rose the most in nine months after the company's selection for the Standard & Poor's 500 Index put its stock within reach of money managers with about US$1 trillion in assets.
The Class B stock, which shareholders voted to split 50- for-one last week, jumped US$3.36, or 4.9 per cent, to close at US$71.36 in New York Stock Exchange composite trading on Wednesday.
The Omaha, Nebraska-based company will replace Burlington Northern Santa Fe Corp in the index after completing a planned takeover of the railroad, S&P said in a statement on Tuesday.
Mr Buffett split the shares as part of the US$26 billion deal to acquire the Fort Worth, Texas-based railroad. That brought Berkshire's stock below US$75, making shares available to a larger group of investors and increasing the trading volume. Mr 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 per cent of Berkshire.
'There's going to be tremendous buying demand because of this inclusion,' said Glenn Tongue, a partner at T2 Partners, which owns Berkshire shares. 'That's a catalyst for the stock.'
Funds that track the S&P 500 have about US$1 trillion in assets, according to David Guarino, a spokesman for S&P in New York.
Wednesday's trading boosted the value of Mr Buffett's personal Berkshire stake, which includes Class A and Class B shares, by about US$2 billion.
The company has gained 7.1 per cent since the share split was approved on Jan 20.
'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 US$12.8 billion. Berkshire 'is a stock that belongs in the S&P 500'.
Mr 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 Mr Buffett who owns roughly a quarter of the stock. Berkshire's Class B shares traded as high as US$3,340 the day before the split took effect.
Berkshire's Class A shares rose US$5,249 to US$107,000. The firm, which is valued at about US$166 billion, has advanced more than 10-fold over the last two decades. -- Bloomberg
"If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong" - Bernard Baruch
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