In 1965, Warren Buffett acquired control of a New England textile business calle
ID: 2633496 • Letter: I
Question
In 1965, Warren Buffett acquired control of a New England textile business called Berkshire Hathaway for about $10 a share. Today the stock sells for around $120,000 a share and Mr. Buffett is the wealthiest person in the United States. The stock has never paid a dividend. How does this amazing success fit the theory that the value of a stock is based on the present value of the expected future stream of dividends? Visit www.berkshirehathaway.com and get familiar with the company. Tell me what you think the future holds for the company. Read his letters to his shareholders (they are in the Content Area) and what he calls the Berkshire Hathaway "owners manual" (also in the Content Area). In an age of hi-tech why did he recently buy the Burlington Northern Railroad for $44 billion? How will the company fare after his inevitable departure?
Explanation / Answer
The decision of Warren Buffet to buy the Burlington Northern Railroad for $44 billion in a hitech era was to work traditionally and earn revenues without any loss. It was the simplest and safest technique to invest and earn. The risk factor is less. The company will fare after the inevitable departure by simltaneous earnings and overcoming the dues owned by it.