David Serchuk, 03.02.10, 04:30 PM EST
He's the best investor of the past half-century and maybe of all time, but Warren Buffett's own company is no screaming value.Retail investors of modest means have long had to sit on the sidelines when it came to Berkshire Hathaway. That's recently changed as the common "B" shares of Warren Buffett's firm have become affordable for investors with portfolios of all sizes. But just because you can buy Berkshire doesn't mean you should.
In fact a good case can be made that Berkshire Hathaway's ( BRK - news - people ) shares are overvalued--just the type of purchase Buffett would avoid. So contends Vahan Janjigian, chief investment strategist at Forbes and a noted Warren watcher, as befits the author of Even Buffett Isn't Perfect.
"In my opinion, if Buffett were completely disassociated from Berkshire, he probably would not invest in it today," says Janjigian. "It is difficult to argue the stock is cheap."
Berkshire's A shares trade at $122,800 and have a trailing price-earnings ratio of 37.3, more in line with tech stocks than insurance firms (the average P/E for property and casualty insurers is 8.3). To be fair, Berkshire is into a lot more than insurance, as its portfolio includes trucking, railroads, candy, soft drinks and furniture, just to name a few diverse industries, but Berkshire's rich multiple also looks rather plump in relation to the overall market; the S&P 500 is trading at 21.7 times trailing earnings.Download the 2009 Warren Buffett Letter & 2009 Annual Report to Berkshire Hathaway Shareholders
Download the 1977 - 2009 Warren Buffett Letter's to Berkshire Hathaway Shareholders
Recommended Amazon Reading
|The Snowball: Warren Buffett and the Business of Life by Alice Schroeder|
Buy new: $13.60 / Used from: $10.34
Usually ships in 24 hours
Even Buffett Isn't Perfect: What You Can--and Can't--Learn from the World's Greatest Investor by Vahan Janjigian
Buy new: $4.80 / Used from: $2.49
Usually ships in 24 hourS