Thursday, June 26, 2008

Berkshire Will Not Grow At Rates Previously Seen


According to the man himself, Warren Buffett, you should sell your stock in Berkshire Hathaway if your expectation is to see the kinds of rates of growth that the stock has seen in the past. It's not that he believes it's a bad investment, of course, but rather that it is just so big that it's difficult to make acquisitions that would result in "needle moving" events for the holding company.

Buffett has been circling the globe of late with $35.6 billion in cash looking for deals. When you have that kind of money to spend, only truly sizable deals even show-up on the radar. Moreover, imagine how large a deal would have to be to result in significant move in the stock of Berkshire; these two forces 1) looking for large companies to buy, and 2) the fact that large companies are unlikely to offer significant growth rates, lead to Mr. Buffett's statement and it makes a lot of sense (as do most things that Mr. Buffett says).

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