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Berkshire Hathaway, Inc.

Trading at $69,400 (BRK.A), $2310 (BRK.B) as of May 7, 2001

Dear Ma:

It's never easy to get gifts for you, since you are a woman of few wants and high standards. I know you appreciate the sentiment behind the baubles people give you on holidays, but I also know that you have little use for things that are not essential or uniquely personal.

The problem with choosing appropriate stocks for you is that most companies aren't good enough. It's got to be a known quantity, a stock that, while it will naturally fluctuate, can be counted upon to perform consistently. It's got to be a company that won't experience unpleasant surprises, like accounting irregularities or fraud. It has to have management of the highest trustworthiness and integrity.

I'd like to find you a company that reflects your values. You've always prized honesty and social responsibility. You've sought to exemplify the qualities that our society prizes but doesn't practice, ones that are necessary for living a good life. With the bar set this high, it's understandable that precious few companies measure up.

There is one, and only one, that I think is good enough for you: Berkshire Hathaway(NYSE: BRK.A). Its managers -- Warren Buffett, Charlie Munger, and others -- are extremely capable and honorable. They are universally admired as fantastic investors and managers, but very few follow their example.

Many people would say that buying Berkshire for its management is a mistake. They say that the business model is many times more important. They also point out that management is not eternal: Buffett at 70 and Munger at 77 don't offer long-term assurance of quality management.

Bollocks, I say. Management is key in every business, and at Berkshire in particular. Berkshire's primary business is insurance. Writing insurance is not in itself a profitable venture. What's profitable is having use of the money that clients pay long before their claims have to be paid -- the "float." The level of profitability at an insurance company depends on its ability to invest the float well. That is management's never-ending responsibility. Charlie Munger summed it up best at the recent shareholders' meeting: "We're like the hedgehog that only knows one big thing. If you can generate float at 3% and invest it in businesses that generate 13%, that's a pretty good business."

That 13% is not easy to get, however. It takes excellent capital allocation ability. That's Buffett's job, and he excels at it. He has increased the book value of Berkshire 208,000% during his 36-year tenure. Compare that to the 5,383% return he would have gotten by investing in an S&P 500 index fund. No one invests like Buffett. Fellow Fool Selena Maranjian calls him "The Allocator."

I'm also not worried about succession. Buffett selects his companies and managers with great care. He has at least one other Allocator in the organization -- Lou Simpson, who manages Geico's portfolio. Buffett has repeatedly asserted that Simpson's investment record "is better than mine." If that's so, it's an outstanding record indeed.

The final reason I'm giving you Berkshire for Mother's Day is See's Candy. You've often said that you can't understand why anyone would eat sweets that aren't chocolate. See's offers the best chocolates west of the Rockies. Paul Commins offered his motherHershey Foods(NYSE: HSY) last year -- I'd say that you are getting much higher quality.

I won't launch into a valuation of Berkshire here. It's much too long a discussion, and I don't think you really care that much anyway. This is a gift, and when you find something that so reflects the personality and values of the recipient, you can't haggle over price. Whatever the price of Berkshire Hathaway, you're worth it. In that spirit, I won't remind you that I suggested you buy Berkshire last March at about $45,000. In fact, I also won't mention that Berkshire is up about 55% since then. That would be petty. This is Mother's Day, not the National Day of Repentance. I'm sure that certificate of deposit you bought did well, too.

Besides, my gift is the suggestion, not the stock. Heck, the darn thing is $69,400 a share! And the "B" shares are $2,310! I will, however, send you a box of See's chocolates. Maybe that will entice you to join me at next year's annual shareholders' meeting.

Happy Mother's Day!

Love,

Bri

Brian Lund owns a small -- some might even say inconsequential -- slice of Berkshire Hathaway. At the meeting this year, he shook The Allocator's hand, got Charlie's autograph, and snarfed lots of See's peanut brittle. He was in seventh heaven. To see his holdings, check out his profile. The Motley Fool is investors writing for investors.

A Stock for Mom represents the opinion of one Fool and should in no way be taken as the opinion of either The Motley Fool, Inc. or the company in question, or as representative of anyone or anything other than that specific Fool's thoughts.

Next: Delta Air Lines: A Short for Mom »


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