How High Can it Go?

(Click on graph to enlarge)

One of the most unusual things about Berkshire Hathaway is the very high price of its stock. Today's closing price was an astounding $109,000 per share, and, as indicated in the five-year graph above, that's not unusual. Most stocks you see on CNBC's ticker are trading somewhere below $100 and change by single-digit amounts. Not Berkshire Hathaway. Today, their stock went up by $649 per share. Of course, this represents a fraction of a percentage change, which is all that matters when you have stock in a company. Even still, the numbers seem astronomical.

These high stock prices are the result of Warren Buffett's philosophy of not splitting the stock. According his company's 1983 annual report, he seems to want to keep a certain class of investors and keep other types away. Mr. Buffett states:

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. At $1300, there are very few investors who can’t afford a Berkshire share. Would a potential one-share purchaser be better off if we split 100 for 1 so he could buy 100 shares? Those who think so and who would buy the stock because of the split or in anticipation of one would definitely downgrade the quality of our present shareholder group. (Could we really improve our shareholder group by trading some of our present clear-thinking members for impressionable new ones who, preferring paper to value, feel wealthier with nine $10 bills than with one $100 bill?)

Obviously, the company has some very high standards for the type of shareholders they want to attract.