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What the World's Best Investor Is Buying Now

By Dr. Steve Sjuggerud
Tuesday, September 27, 2011

Up 490,409%.
 
That number is not a misprint. That is the amount that Warren Buffett – the greatest investor of all time – has increased shareholder equity in his company, Berkshire Hathaway, since he took over in 1965.
 
Traditionally, Buffett has used the cash that comes into his company to buy cheap companies. He's always on the hunt for fantastic value.
 
But apparently, Mr. Buffett thinks the best value in the stock market today is his own company... Yesterday, Berkshire announced it's buying back shares of its own stock. This could be the perfect opportunity for us to get into the company, too...
 
"The underlying businesses of Berkshire are worth considerably more [than the stock market value]," the company said in a statement.
 
Shares of Berkshire are cheap by any traditional measure. For example, Berkshire is trading close to its "book value." Whenever that's happened in the past, it's been a great time to buy the stock. Take a look:
 
 
 
Buffett's favorite rough gauge of his own company is book value. This measure is so important to him, he shows a table of the growth in book value in every annual report before his letter to shareholders.
 
Shares of Berkshire got this cheap compared to book value in the dot-com era back in 2000, when "boring" moneymakers like Buffett were cast aside as "too old to get it." And Berkshire got this cheap again in the great bust in March 2009, when it felt like the financial world was coming to an end.
 
If you were bold enough to buy at either of these times, you'd have been a happy investor 12-18 months later.
 
This is the first time Berkshire has bought back its own shares. It tells us that the world's best investor thinks his own business is dirt-cheap.
 
Berkshire has plenty of cash to commit to this program – $48 billion of it. And the company announced it was willing to pay up to 1.1 times book value for its own stock... which means it's willing to pay nearly $109,000 per "A" share or roughly $72.50 per "B" share. (These numbers are not exact, just close and easy to remember.)
 
I think this creates a "floor" in the stock price. Any time the stock falls much below that, Berkshire will buy it... or investors will buy it thinking that Berkshire will. As I write, both share classes are below those prices.
 
I love it... Your downside is limited (thanks to the new buyback creating a "floor" and investors that will follow suit). Meanwhile, your upside is unlimited – and the world's greatest investor is managing your money.
 
My True Wealth subscribers already own the stock. And now is the best time in decades for you to buy it, too...
 
Good investing,
 
Steve




Further Reading:

"Once stocks finally bottom, we could have one of the greatest buying opportunities in the history of the stock market," Steve says. "The values we're seeing right now in stocks around the world may be the best values I will ever see in my lifetime." Read more here: Stocks Versus Gold: Which to Choose Now?
 
Is the ideal investment the one with the highest potential returns? Actually, no... Steve tells us how to define the "ideal" investment... what the ideal investment has been over history... and the easiest way to invest in it. Get the details here: The Ideal Investment to Own, Based on History.

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IT'S HARD TO BELIEVE, BUT AIRLINES ARE RALLYING

Despite the increasing chances of a U.S. recession... despite the euro debt crisis... and despite being some of the worst businesses in the world, airline stocks are actually rallying.
 
Earlier this month, we noted how airlines sport razor-thin profit margins, are subject to wild swings in fuel costs, and require lots of capital expenditures to stay running. This makes them horrible long-term investments. But from a trading viewpoint, it's worth noting that airlines go through big "boom and bust" cycles. These cycles can be traded for big profits.
 
Airlines spent this summer in "bust mode." Most of the big airlines lost 30%-50% of their share values in just a few months. But the sector has recently "dug in" a tradable bottom... and could be due for a "bad to less bad" rally.
 
In our initial write-up, we displayed a chart of Southwest Airlines (LUV) and noted shares had put in at least a short-term bottom. Today, we note how LUV's competitor, US Airways, sports a similar bottom... and just reached its highest high in over a month. It's a "hard trade" to buy airlines right now... which leads us to expect profits ahead.

Despite all the

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Extreme Value loves Berkshire... and this stock too…
 
Dan Ferris believes his readers will make big profits in safe businesses like this starting right now…
 
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