“Shareholder eugenics,” Warren Buffett once wrote, “might appear to be a hopeless undertaking” – but by refusing requests for a stock split at Berkshire Hathaway, its founder believes he has attracted a better class of shareholder.
The consequences of that refusal were on display on Thursday when Berkshire shares changed hands above US$200,000 for the first time, a milestone that means Buffett’s conglomerate has the highest priced shares on trading in New York, the Financial Times reported Friday.
The company’s value has risen 12 per cent this year, including a 6 per cent surge since the start of August, as investors have looked beyond Buffett to focus on the earnings power of its collection of industrial, insurance and utility businesses.
“Were we to split the stock or take other actions focusing on stock price rather than business value, we would attract an entering class of buyers inferior to the exiting class of sellers,” he wrote in the 1983 letter to shareholders, which he has cited on occasion since.
Making the stock more expensive, he argued, encourages investors to take a long-term view and locks out those more likely to trade on emotion.
At the age of 83, questions of Buffett’s succession plans are never far from the surface, but analysts say he has persuaded the market to view Berkshire as a holding company that will outlive him, rather than as a quixotic collection of investments assembled since he took control of what was then a small textile firm in 1964.
“People are realising that this is a great standalone mix of businesses, available at a reasonable price, with one of the world’s best managers at the helm,” said Barclays analyst Jay Gelb.
Berkshire’s A class shares ended the day at US$202,850 compared with US$1,285 for the travel website Priceline, the next highest-priced stock.
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