Get Ready for the Fall?

"The bigger they are, the harder they fall." It's the worst nightmare of every investor in today's market -- buying a rocket stock just before it takes a nosedive.

Every day, WSJ.com publishes a list of stocks whose shares have just hit new 52-week highs. Every day, investors read the list and tremble -- some with greed, others with terror. Within our Motley Fool CAPS investing community, these top stocks generally enjoy favorable ratings, since everyone loves a winner ... but not always:

Companies are selected from the "New Highs & Lows" lists published on WSJ.com on Friday last week. 52-week low and recent price provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

"Everybody loves a winner"
After the tumble the markets endured over the last two weeks, you might be surprised to discover that any stocks are still doing well. But yes, a few of them are. Sirius, Genworth, Boeing … each of the five companies named above, in fact, sits today at its highest level in a year.

Judging from the ratings they're handing out, Fools don't seem all that confident that all of these stocks can maintain altitude. One company whose staying power almost no one doubts, though, is 121-year-old Berkshire Hathaway. The reason can probably be summed up in two words (hint: "Warren Buffett"), but let's see if any of our CAPS members can elaborate on that a bit.

The bull case for Berkshire Hathaway
New CAPS member yankeenick wrote a veritable book on Berkshire back in November (seriously, it's close to 1000 words). I won't reproduce the whole tome for you, but here are a few samples:

[Berkshire has] $80k of book value and likely $150-200k of intrinsic value for $103k/share. It is a STEAL. The stock is trading at a major discount ... His operating businesses are not sexy (other than Geico), but most of them have well established moats and should bounce back nicely. Geico's free float is always nice, as is $6k/share in earnings from these businesses in a trough year. ... [The Burlington Northern (NYSE:BNI)] Acquisition will earn solid ROE even at awful rail utilization levels. ... In a peak year with high gas prices (i.e. 2013-2015), [Burlington] could earn $10 /share (BNI share) through continual 10% increases in price & huge increases in volume.

And yet, according to CAPS member stefaith: "The market seems to have forgotten everything about Berkshire that is important. Buffett's bet on [Goldman Sachs (NYSE:GS)] has already earned billions. [General Electric (NYSE:GE)] is not in the money yet, but the point to remember is that Berkshire is still getting a hefty 10% on its loan, no losses here."

And speaking of Buffett's inordinately profitable Goldman and GE bets, Hairetikos describes how he secured them: "Size allows [Berkshire] to get better deals than anyone else. Experienced management with great track-record."

Size matters ... but Buffett matters more
And yet, when you get right down to it, that's still -- and always will be -- the main reason for owning Berkshire: "Experienced management." Warren Buffett.

But it's also the reason I disagree with my fellow Fools on this stock. There's no disputing that Buffett has been the best investor in recent memory, but seriously, folks, he's no spring chicken -- and admits as much, himself. What's more, I'm not at all excited by the changes he's been making around the house as he prepares his company for Life After Warren.

I mean, splitting the A shares 1-for-30 into B shares -- I get that. Not everyone can own the Mona Lisa, but at least anyone can own a print. Creation of the Baby Berkshires gave serious investors a chance to own at least a piece of the Masterpiece. But his recent move to split each B-share into 50 new mini-B's? Each of Berkshire's now-smallest-denomination shares now amounts to less than seven one-hundredths of one percent of an A-share. That's like taking a Ginsu to the Mona Lisa. The increased liquidity of the shares will probably attract more short-term speculators, the type of "investors" Buffett has always shunned.

For related, but entirely different reasons, I disapprove of the Burlington purchase that sparked the mini-B travesty. As I explained last month, I am not convinced that Buffett's Burlington buy was conducted with the aim of making the maximum amount of money for shareholders. To my Foolish eye, Buffett intended rather to deploy excess cash in a "safe place," in order to ensure said cash could not be frittered away on even worse investments after Buffett's passing.

Foolish takeaway
Now, as far as Burlington itself goes, my view is that it's a fine railroad ... but that if I wanted to own a railroad, I'd buy a railroad stock. In contrast, an investment in Berkshire Hathwaway is first, last, and always an investment in Buffett himself. But Buffett won't be around forever.

In fact, judging from the moves he's been making lately, I'd say the real Warren Buffett has already left.

Time to chime in
I went into this column knowing it would generate some criticism, so don't hold back. If you disagree with me about Berkshire Hathaway's investability, then here's your chance to respond.

"Lay on, Macduff. And damned be him that first cries, 'Hold, enough!'"