You missed it, didn't you? The sale, I mean. On Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) stock.
For a brief, shining moment, you could have bought shares in arguably one of the best investment vehicles ever at prices not seen in five years. It must have been temporary insanity that brought it on, but Berkshire A shares went below $75,000 -- a 12% discount from their low point just the day before, and more than half off their all-time high from earlier this year. What were people thinking?
Different this time?
They were thinking that Buffett had lost his touch and that he was too smart by half. They thought he took positions too early in Goldman Sachs (NYSE: GS) and General Electric (NYSE: GE). He dabbled in derivatives, which he once derided as weapons of financial mass destruction. And he invested in railroads, an industry he once noted both he and Charlie Munger hated. Sure, the Burlington Northern Santa Fe (NYSE: BNI) investment looked great for a while after he bought the stock in April 2007, but now it's tumbled -- yet he continues to add more. His long-term outlook might not be so farsighted anymore.
After the big drop, the market regained some of its sanity, as those shares crested back above $100,000. In less than one week, you could have earned a quick 33% return -- as long as you had the courage to believe that Buffett hadn't taken leave of his own senses. You can't say you weren't told. Some smart Fools pointed out early on that there was nothing wrong with Berkshire Hathaway.
Knowing true value
But it's more than just about Berkshire stock having been cheap before and more expensive now. It was simply undervalued before. The market was crazy. The derivative bets he made exposing Berkshire to potentially $35 billion in payments have an expiration date 10 years or more into the future. Hedge fund manager Whitney Tilson doubts Buffett will have to pay even a dime on them.
And while Berkshire's credit default swaps have seen their prices rise significantly, indicating some investor concern, bondholders in Berkshire don't have the same trepidation. According to the International Herald Tribune, none of Berkshire's bonds have traded at more than a 5% discount to par value, suggesting that owners aren't worried in the least about a default.
Yes, it could be a bit worrisome that Buffett at times seems to go off-script, but sometimes you need a rewrite. There was plenty of opportunity to get in on Berkshire at fire sale prices, and even now, shares are well off their highs. If you didn't move before and aren't thinking of moving yet, you've perhaps missed out on the best investment opportunity. Ever.
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