The good news here is that Warren Buffett is less cautious than in the past and is far less pessimistic and depressed compared to how he sounded a year ago.  Buffett claims to have added at least 650,000 shareholders to the 500,000 or so already on Berkshire’s books.  What is going to be different here is that Buffett is appealing to the new shareholders to understand what the company is and what it is not by directing holders to its principles…. Buffett notes, “Berkshire has adhered to these principles for decades and will continue to do so long after I’m gone.”

And there are many more zingers and explanations throughout, along with constant references to Charlie Munger.

As everyone wants to know how they can chase Warren Buffett investing, we have gone way out-of-order and shown his largest public common stocks first.  If you want to know why Buffett is more confident today regardless of tones, take a look at the largest Buffett and Berkshire public common stocks.  There are far better cost basis versus market value comparisons compared to a year ago:

151,610,700 American Express Company (NYSE: AXP) at a 12.7% stake with a $1.287 billion cost basis with a $6.143 billion market value.

200,000,000 The Coca-Cola Company (NYSE: KO) at a 8.6% stake with a cost basis of $1.299 billion and a market value listed as $11.400 billion.

37,711,330 ConocoPhillips (NYSE: COP) for a 2.5% stake with a cost basis of $2.741 billion and an implied market value of $1.926 billion.

28,530,467 Johnson & Johnson (NYSE: JNJ) for a 1.0% stake with a cost basis of $1.724 billion and an implied market value of $1.838 billion.

130,272,500 Kraft Foods Inc. (NYSE: KFT) for an 8.8% stake with a cost basis of $4.33 billion and an implied market value of $3.541 billion.

83,128,411 The Procter & Gamble Company (NYSE: PG) for a 2.9% stake.  We would double-check this but the cost basis is listed as $533 million and given a value of $5.04 billion.

76,633,426 U.S. Bancorp (NYSE: USB) for a 4.0% stake with a cost listed as $2.371 billion and an implied market value of $1.725 billion.

39,037,142 Wal-Mart Stores, Inc. (NYSE: WMT) for a 1% stake with a cost basis of $1.893 billion and a market value of $2.087 billion.

334,235,585 Wells Fargo & Company (NYSE: WFC) is a 6.5% stake with a cost basis of $7.394 billion and an implied market value of $9.021 billion.

Other stocks come to $6.68 billion in adjusted cost basis and had/have a market value of $8.636 billion.  The foreign largest common stock holdings are as follows:

• 225,000,000 shares of BYD Company, Ltd. for a 9.9% stake with a cost of $232 million and a current value of $1.986 billion.
• 3,947,554 POSCO for a 5.2% stake with a cost of $768 million and an implied value of $2.092 billion.
• 25,108,967 Sanofi-Aventis for a 1.9% stake with a cost of $2.027 billion and a market value of $1.979 billion.
• 234,247,373 Tesco plc for a 3.0% stake with a cost of $1.367 billion and a cost of $1.620 billion.

Total Common Stocks Carried at Market are listed as $34.646 billion cost basis and $59.034 billion in market value.  Due to BNSF and other rails being held, that number will look grossly different ahead in the future on both a cost and market value.

In addition, Berkshire Hathaway owns positions in non-traded securities of Dow Chemical (NYSE: DOW), General Electric Co. (NYSE: GE), Goldman Sachs Group (NYSE: GS), Swiss Re and Wrigley with an aggregate cost of $21.1 billion and a carrying value of $26.0 billion.

As far as performance, size does matter. Buffett noted something very specific here which new Berkshire Hathaway holders and potential holders need to consider very closely….. “The big minus is that our performance advantage has shrunk dramatically as our size has grown, an unpleasant trend that is certain to continue.” Buffett highlighted that certainty himself.

The acquisition and future operations of the company will remain in simple businesses…. “Charlie and I avoid businesses whose futures we can’t evaluate, no matter how exciting their products may be… At Berkshire we will stick with businesses whose profit picture for decades to come seems reasonably predictable. Even then, we will make plenty of mistakes.”

Buffett even talks about investing and lending during the crisis…. “We will never become dependent on the kindness of strangers. Too-big-to-fail is not a fallback position at Berkshire.” Also noted…. “When the financial system went into cardiac arrest in September 2008, Berkshire was a supplier of liquidity and capital to the system, not a supplicant. At the very peak of the crisis, we poured $15.5 billion into a business world that could otherwise look only to the federal government for help.”

Buffett does not bash the ratings agencies for downgrading Berkshire Hathaway, but he did note… “We pay a steep price to maintain our premier financial strength. The $20 billion-plus of cash equivalent assets that we customarily hold is earning a pittance at present. But we sleep well.”

As far as whether or not Berkshire will make more mergers?  Yes it seems, with a caveat…. “With our acquisition of BNSF, we now have about 257,000 employees and literally hundreds of different operating units. We hope to have many more of each. But we will never allow Berkshire to become some monolith that is overrun with committees, budget presentations and multiple layers of management.”

And to hell with trend and populism here from Warren…. “We make no attempt to woo Wall Street. Investors who buy and sell based upon media or analyst commentary are not for us. Instead we want partners who join us at Berkshire because they wish to make a long-term investment in a business they themselves understand and because it’s one that follows policies with which they concur.”

Buffett even backpedaled on the negativity of last year’s (interpreted) message… “Among the 12,830 words in the annual letter was this sentence: “We are certain, for example, that the economy will be in shambles throughout 2009 – and probably well beyond – but that conclusion does not tell us whether the market will rise or fall.” Many news organizations reported – indeed, blared – the first part of the sentence while making no mention whatsoever of its ending.” He even calls it terrible journalism and goes on to say how he and Charlie Munger were not predicting the stock market at all.

GEICO’s growth may slow in 2010…. Buffett also noted that the company sold the small credit card business of a $98 million portfolio of troubled receivables for $0.55 on the dollar.

Buffett explains praise at National Indemnity for Ajit Jain… “If Charlie, I and Ajit are ever in a sinking boat – and you can only save one of us – swim to Ajit.”

The MidAmerican operations, the regulated utility section, gave $1.071 billion to Berkshire, down from $1.704 billion in 2008.  The HomeServices of America unit, the second largest real estate firm in America, is under the MidAmerican unit.  “The BNSF operation has certain important economic characteristics that resemble those of our electric utilities.  It is inconceivable that our country will realize anything close to its full economic potential without its possessing first-class electricity and railroad systems. We will do our part to see that they exist.  In the future, BNSF results will be included in this “regulated utility” section.”

Construction has suffered…. “Every business we own that is connected to residential and commercial construction suffered severely in 2009. Combined pre-tax earnings of Shaw, Johns Manville, Acme Brick, and MiTek were $227 million, an 82.5% decline from $1.295 billion in 2006, when construction activity was booming. These businesses continue to bump along the bottom, though their competitive positions remain undented.”

The major small problem for Berkshire last year was NetJets… “debt has soared from $102 million at the time of purchase to $1.9 billion in April of last year. Without Berkshire’s guarantee of this debt, NetJets would have been out of business.” Ouch.

More on Housing… “On the housing front, addressing Clayton Homes, In 2009, starts were 554,000, by far the lowest number in the 50 years for which we have data. Paradoxically, this is good news.Even under these conditions, I believe Clayton will operate profitably in coming years, though well below its potential.”

On commercial real estate…. At the end of 2009, Berkshire became a 50% owner of Berkadia Commercial Mortgage (formerly known as Capmark).  This is the third-largest servicer of commercial mortgages. “In addition to servicing a $235 billion portfolio, the company is an important originator of mortgages, having 25 offices spread around the country.  Though commercial real estate will face major problems in the next few years, long-term opportunities for Berkadia are significant.”

If you want the classic Buffett on his investing strategies versus cash, it all boils down to this…. Buffett states, “We entered 2008 with $44.3 billion of cash-equivalents, and we have since retained operating earnings of $17 billion. Nevertheless, at year-end 2009, our cash was down to $30.6 billion (with $8 billion earmarked for the BNSF acquisition). We’ve put a lot of money to work during the chaos of the last two years. It’s been an ideal period for investors: A climate of fear is their best friend. Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance. In the end, what counts in investing is what you pay for a business – through the purchase of a small piece of it in the stock market – and what that business earns in the succeeding decade or two.”

The other 90 or so pages hold interesting tidbits and one-liners, of which you can see right at the Berkshire site.

JON C. OGG
jonogg@247wallst.com

A group called RPX Corp., which has Intel Corp. (NASDAQ: INTC), Cisco Systems Inc. (NASDAQ: CSCO), Microsoft Corporation (NASDAQ: MSFT) and more than 30 other tech giants as members, is one that cannot be ruled out.  This company acts as a go-between or virtual intermediary with its RPX Defensive Patent Aggregation service geared to lower the cost and the risk of patent assertion and litigation by non-practicing entities.

Another likely candidate is LM Ericsson Telephone Co. (NASDAQ: ERIC).  The wireless network sale of Nortel had been contested, and Nortel ended up licensing some long-term evolution patents and rights to Ericsson but the ownership stayed under Nortel.

QUALCOMM Inc. (NASDAQ: QCOM) was another name thrown to us last year as a potential bidder, although that may be more to hedge its CDMA and related standards if the long term evolution patents are ultimately used for future wireless standards.  If you have followed patent law for the last decade you have seen major infighting between QUALCOMM and other tech and communications giants.

Another name which has been thrown out is the NTP, Inc. company, which you will remember was the company that scored an empire-building sum from R-I-M.  The status of this entity and its direction is unfortunately something that has gone off our radar.

This week, Dow Jones noted that Mosaid Technologies Inc. and Wi-LAN Inc., both Canadian-based patent license companies, are among the interested parties.

If you go back to the Alcatel-Lucent (NYSE: ALU) merger, despite the notion that Lucent was heading into its own death-spiral, there were many concerns about its huge patent portfolio locked up inside of Bell Labs.  That patent portfolio was effectively allowing a French acquirer to secure thousands of patents on multiple aspects of intellectual property in the world of communications.  At the time of that merger, some felt that the patent portfolio was one of the few real assets behind the motive for the acquisition.

As of December 31, 2007 (mind that date as many operational sales have since been seen), Nortel claimed some 3,650 US patents and about 1,650 patents in other countries  extending across Wireline, Wireless, Datacom, Enterprise and Optical technologies and services. Nortel also noted that it has received patents in the U.S. and elsewhere covering standards-essential, standards-related and other fundamental and core solutions, including patents directed to CDMA, UMTS, 3GPP, 3GPP2, GSM, OFDM/MIMO, LTE, ATM, MPLS, GMPLS, Ethernet, IEEE 802.3, NAT, VoIP, SONET, RPR, GFP, DOCSIS, IMS, Call-Waiting Caller ID and many other areas.  In short, you can see that many companies, sectors, and industries have significant overlaps here.

Patent law is tricky, complex, and extremely complicated.  Patent royalties are often the crown jewels of many companies that never actually have a single operation other than patent ownership.  The term ‘patent troll’ wasn’t created just for laughs.  Then there is the ‘patent workaround’ game where entities dissect patents and come up with a product or process that rework the entire framework of achieving roughly the same endgame.

There are probably dozens of other public technology and communications firms in North America and beyond which are interested in various aspects of the patent portfolio.  Some will probably argue that the future of many patents is murky.  Just keep in mind that intellectual property and the licensing is a multi-billion business.  It is also a field where the owners of the IP claim far more is stolen or worked around without compensation.

Regardless of what the ultimate value of Nortel’s patent portfolio ends up being, this is ultimately the end of the decade-long Nortel death-spiral saga.  As far as the timing of and winners of any such auctions, stay tuned… Anything can happen in bankruptcy court.

JON C. OGG

ConocoPhillips (NYSE: COP), Exxon Mobil Corp. (NYSE: XOM), Becton, Dickinson and Company (NYSE: BDX), Johnson & Johnson (NYSE: JNJ), Gannett Co. (NYSE: GCI), Moody’s Corp. (NYSE: MCO), Wal-Mart Stores Inc. (NYSE: WMT), Procter & Gamble (NYSE: PG), United Health Group (NYSE: UNH), Wellpoint Inc. (NYSE: WLP), Wells Fargo & Co. (NYSE: WFC), Sun Trust Bank (NYSE: STI), Iron Mountain (NYSE: IRM), Republic Services Inc. (NYSE: RSG), Norfolk Southern (NYSE: NSC), Union Pacific Corp. (NYSE: UNP), and NRG Energy (NYSE: NRG) were most of the changed positions at Berkshire Hathaway.  We have given color on each and predictions of which stocks Buffett will probably add to or cut further.

Media outlets spent much time discussing the drop of ConocoPhillips (NYSE: COP) down to about 37.7 million shares.  Buffett telegraphed last year that he made a mistake and that he was going to use these shares as an offset.  The holding was 57.43 million shares a quarter before and down from 62.485 million at the end of June.  That is a position in steady decline.  But the surprise was in Exxon Mobil Corp. (NYSE: XOM).  When it first appeared a quarter ago it was 1.276 million shares, yet the new position was a mere 421,800 shares most recently.  If Buffett wants a major position in big-oil, he needs to boosting that stake in ExxonMobil rather than cutting it.  Buffett was bottom-fishing in ConocoPhillips and he got the timing wrong.  In short, Buffett found out he was bottom-sniffing rather than bottom-fishing.

The surprise was in medical-related stocks.  He increased slightly the Becton, Dickinson and Company (NYSE: BDX) to 1.5 million shares from 1.2 million shares.  That is barely a $20 million change, but this is a medical devices and instruments company and was a new portfolio addition in 2009.  Over at Johnson & Johnson (NYSE: JNJ), Buffett’s position went down to over 27 million shares from over 36.9 million shares a quarter before.  As far as a bias here, it seems that J&J is creeping lower in the Buffett realm, but we’d look for additional positions in Becton if the stock does not go up too much.

Gannett Co. (NYSE: GCI) was a decreased holding of 2.202 million shares, down from 3.447 million last quarter.  No shock here, particularly since the stock has come roaring back.  Buffett has panned newspapers.  Moody’s Corp. (NYSE: MCO) was slashed  again to 31.8 million shares.  That is down from 39.2 million shares a quarter before and under the 48 million the quarter before that.  Our only surprise here is that Buffett still owns any of this one at all.  We think he is on his way to exiting completely, even if he will hold a small stake.

Wal-Mart Stores Inc. (NYSE: WMT) got a small boost to over 39 million shares versus 37.8 million a quarter earlier, but this was well above the 19.9+ million shares two quarters ago.  If Buffett needs to hide money in a liquid instrument, this is perhaps one of the easiest spots to do it.  Procter & Gamble (NYSE: PG) is a decreased position of about 87.5 million shares, down from 96.3 million.  P&G is considered one of the most stable names out there, but maybe Uncle Warren thinks it is fully valued.  P&G was actually a surprise to see it lower.

The obvious change is that Buffett is still lightening up against his health insurance stocks… These have enjoyed significant recoveries, but many still fear what Obamacare will do to these.  Buffett may have supported Obama in the election, but business is business.  United Health Group (NYSE: UNH) was cut to 1.175 million shares from 3.4 million shares a quarter ago and marks the third consecutive decline in holdings here.  Wellpoint Inc. (NYSE: WLP) was cut to 1.343 million shares from 3.394 million shares a quarter earlier and also marks three 3 consecutive quarters there.

Buffett made some changes in his bank holdings.  Wells Fargo & Co. (NYSE: WFC) was an increased position to about 319.5 million shares versus 313.3 million shares a quarter ago, and that was also above the 302 million and the 290+ in each of the preceding quarters.  Sun Trust Bank (NYSE: STI) was where Buffett cut… almost 2.4 million shares, down from 3.079 million shares and down from 3.2+ million in each consecutive preceding quarter.  Buffett has said Wells Fargo is his favorite bank, so he doesn’t even really need SunTrust.  Buffett can keep adding to Wells Fargo.

Iron Mountain (NYSE: IRM) was a “buy more on sale” bet.  Most of Buffett’s holdings are not down as much from highs like this company is in business services for document storage and back-up.  The holding was effectively doubled to 7 million shares to worth more than $150 million today.  As far as whether Buffett will grow this, that probably depends upon price more than anything else.

Republic Services Inc. (NYSE: RSG) is really no surprise at all that the position has been raised.  Bill Gates’ Cascade Holdings has taken a board seat and a large stake, and we know that Buffett will follow Bill Gates into any great investment.  Besides, garbage and waste removal companies enjoy significant barriers to entry and limited competition.  That is now 8.29 million shares after having been a new position in Q3-2009.  Our bet is that this position is even larger already or will be by the end of this quarter.

Norfolk Southern (NYSE: NSC) and Union Pacific Corp. (NYSE: UNP) were both eliminated.  It is surprising that these were both down late yesterday on the news.  It is also surprising that many major media outlets just said that Buffett dropped his stakes here.  Buffett already said last year after his whale of a deal for BNSF that he would dump his holdings in competing rail companies.  This should have been a more than known event. NRG Energy (NYSE: NRG) was a bit of a surprise to be completely eliminated because it is a wholesale power generation company.  Berkshire held 7.2 million last quarter.  We always thought that Buffett was going to try to do a whale of a deal in the electric utility sector rather than in the rail sector, but maybe Buffett decided that the rail was a good enough utility for exposure there.  Rails are utilities if you gre up playing Monopoly.

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JON C. OGG

• Republic Services Inc. (NYSE: RSG) is a raised holding of 8.29 million shares after he started the position the prior quarter in his move to invest with (or behind) Bill Gates.
• Sanofi Aventis (NYSE: SNY) more than 3.9 million shares, same as before.
• Sun Trust Bank (NYSE: STI) is a decreased position of almost 2.4 million shares, down from 3.079 million shares a quarter ago and down from 3.2+ million two quarters ago.
• Tiffany & Co. (NYSE: TIF) is NOT a common stock… but Buffett still holds the preferred shares and warrants.
• Torchmark Corp. (NYSE: TMK) roughly 2.82 million, same as before.
• Travelers Cos (NYSE: TRV) is the same as 27,336 shares, a tiny holding.
• US Bancorp (NYSE: USB) roughly 69 million; Same as quarter before.
• USG Corp. (NYSE: USG) 17.072 million shares, same as before.
• United Health Group (NYSE: UNH) is a decreased holding of 1.175 million shares, down from 3.4 million shares a quarter ago and marks the third consecutive decline in holdings here.
• United Parcel Service (NYSE: UPS) 1.429 million shares, same as before.
• Wal-Mart Stores Inc. (NYSE: WMT) is an increased position at just over 39 million shares versus 37.8 million a quarter ago and well above the 19.9+ million shares two quarters ago.
• Washington Post (NYSE: WPO) over 1.72 million shares, same as before.
• Wells Fargo & Co. (NYSE: WFC) was an increased position of close to 319.5 million shares versus 313.3 million shares a quarter ago and above the 302 million two quarters ago and even above the 290+ million shares three quarters ago.
• Wellpoint Inc. (NYSE: WLP) is a decreased position of 1.343 million shares, down from 3.394 million shares a quarter ago and down 3 quarters in a row.
• Wesco Financial Corp. (NYSE: WSC) 5.703 million shares, same as before.

Union Pacific Corp. (NYSE: UNP) was eliminated as a holding as Buffett already had his all-in bet on America with BNSF.

BUFFETT HOLDINGS ‘A to F’

BUFFETT HOLDINGS ‘G to P’

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JON C. OGG

• Gannett Co. (NYSE: GCI) is a decreased holding of 2.202 million shares, down from 3.447 million last quarter.
• General Electric Corp. (NYSE: GE) 7.777 million shares is the same as before, but does not include the huge preferred investment from late 2008.
• Goldman Sachs Group Inc. (NYSE: GS) is NOT a common stock… but Buffett still holds the preferred shares and warrants.
• GlaxoSmithKline (NYSE: GSK) 1.51 million shares, same as before.
• Harley-Davidson, Inc. (NYSE: HOG) is NOT a common stock… but Buffett still holds the preferred shares and warrants.
• Home Depot Inc. (NYSE: HD) 2.757 million, same as last quarter.
• Ingersoll-Rand (NYSE: IR) 636,600 shares; same as last quarter but way down from the 7.78 million two quarters ago.
• Iron Mountain (NYSE: IRM) is a raised holding of 7 million shares versus 3.3722 million shares a quarter ago.
• Johnson & Johnson (NYSE: JNJ) is a decreased position of just over 27 million shares; this is down from just over 36.91 million shares before and still well under the 62 million shares at one point in 2008.
• Kraft Foods (NYSE: KFT) over 138 million; same as last quarter.
• Lowe’s Companies (NYSE: LOW) 6.5 million shares, same as last quarter.
• M&T Bank Corp. (NYSE: MTB) 6.71 million shares, same as before.
• Moody’s (NYSE: MCO) is decreased again to 31.8 million shares versus 39.2 million shares a quarter before and under the 48 million the quarter before that.
• Nalco Holding (NYSE: NLC) 9.0 million shares, same as last quarter.
• Nestle ADR is 3.4 million shares, same as before.
• Nike Inc. (NYSE: NKE) 7.641 million shares, same as before.
• Procter & Gamble (NYSE: PG) is a decreased position of approximately 87.5 million shares, down from 96.3 million.

Norfolk Southern (NYSE: NSC) has been eliminated in the quarter as Buffett already had his all-in bet on America with BNSF.

NRG Energy (NYSE: NRG) has been eliminated as a position entirely, down from 7.2 million last quarter.

BUFFETT HOLDINGS A to F

BUFFETT HOLDINGS R to Z

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JON C. OGG

• American Express Co. (NYSE: AXP) over 151.6 million shares, same as last quarter.
• Bank of America Corp. (NYSE: BAC) 5 million shares; same as last quarter.
• Becton Dickinson & Co. (NYSE: BDX) is a raised position 1.5 million shares, was only 1.2 million in prior quarter.
• Carmax Inc. (NYSE: KMX) is a decreased position of 8 million shares, down from 9 million one quarter ago.
• Coca Cola Co. (NYSE: KO) right at 200 million shares, still same as before.
• Comcast (NASDAQ: CMCSA) 12 million shares, same as before.
• Comdisco Holdings (NASDAQ: CDCO) roughly 1.5 million shares, same as before.
• ConocoPhillips (NYSE: COP) is a decreased position of 37.7 million, was 57.43 million shares before and down from 62.485 million at the end of June.
• Costco Wholesale (NASDAQ: COST) 5.254 million shares, same as before.
• Exxon Mobil Corp. (NYSE: XOM) is a decreased holding of only 421,800 shares, this was a new holding last quarter and was 1.276 million shares.

Burlington Northern Santa Fe (NYSE: BNI) was of course still a holding, but this no longer matters as it has been acquired in a deal which was completed Friday.

BUFFETT HOLDINGS G to P

BUFFETT HOLDINGS R to Z

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JON C. OGG

In the Board Letter, Mr. Burkle also reiterated concerns regarding the adequacy and enforcement of corporate governance policies and practices after recent adoption of a poison pill.

Some of the quotes from Burkle’s letter are as follows:

“…. We believe Barnes & Noble is currently undervalued, and have therefore bought approximately 19% of the outstanding Barnes & Noble common stock in open market purchases.  I was surprised to find that, even though I spoke with Leonard Riggio prior to our purchasing any shares to make sure he understood our views and concerns as an investor, the Company has reacted to our stock purchases by implementing a poison pill prohibiting us (or any other non-Riggio shareholder) from acquiring stock ownership above a 20% threshold.

The fact that the Riggio family and other Company insiders own over 37% of the outstanding stock, and that over the past 3 years Len was allowed to increase his personal stake by approximately 10% of the outstanding stock (to over 30% of the outstanding shares), in my view shows that the Board and its Chairman endorse two sets of rules: one for the Riggio family, and one for the rest of the Company’s shareholders.  I believe the poison pill allows Len and other Company insiders to exert effective control over the shareholder franchise, while at the same time Len has taken a great deal of money off the table by selling his textbook business to the Company, thereby reducing the Company’s liquidity and burdening the Company and its shareholders with significant debt to finance that purchase.

We believe having over 37% of the Company shares in the hands of the Riggio family and other insiders, coupled with the 20% ownership limitation enforced on other shareholders under the poison pill, has a coercive effect on the Company’s other shareholders and gives the Riggio family a preclusive advantage in any proxy contest.  This has the effect of placing de facto control of the Company in the Riggio’s hands, despite their owning much less than a majority of the Company’s shares….”

What is significant about that 37% stake is that it would give Yucaipa the largest nominal stake in the company, and would be an attempt to keep the founding family members from having full control of the company.  Barnes & Noble closed up almost 3% at $18.00 today and the 52-week trading range is $15.28 to $28.78.  Shares are up over 15% at $21.30 in the after-hours session.

JON C. OGG

This is a subject that will be an unpleasant one for Warren Buffett going forward, but we’d like to discuss the possibilities of a much more universal stock split compared to what we are seeing here today.

The B-shares reflect the stock split and were up almost 3% at the open and had traded more than 300,000 shares at the bell.  At 9:50 AM EST we now have shares up 3.8% at $72.17.  The previous close was put at an adjusted price of $69.52, but that was listed as $3,476.00 on an unadjusted basis.

Buffett said the decision was an easy one to make to split the B-shares to accommodate the BNSF holders so that they would not be put at a disadvantage.  That ‘easy decision’ stance is a change from the past.   The merger was already a game-changer and Buffett called it an all-in bet on the future of America.  The problem is that the A-shares are actually put at a disadvantage on the liquidity now.

At the same time the B-Shares are up, the A-shares are up over 4% at $109,050.00 on about 900 shares.  Second guessing Buffett is not always a fun angle to take, but if this was truly such a game-changing merger, the time has come for Buffett to split the A-shares as well.  Having this much inequity in the shares now makes little or no real sense.  Does that split need to be 50 or 100 for 1? No it does not.  But would a $10,900.00 be far less prestigious than a $109,000.00 stock?  Maybe a bit, but the new normal is not supposed to be about flashing wealth and status symbols if you have read the news over the last year.

The A-shares at this point may represent nothing more than a vanity position.  If Buffett were to split his entire share base to the newer level, the company would be a shoe-in for inclusion as one of the 30 Dow Jones Industrial Average stocks.  It may make the S&P 500 Index based upon today’s split, but the liquidity issues and high insider ownership by Buffett (his trust now) would give it a far lower weighting than its market cap would  otherwise indicate.

This new move today should make it far easier for the public to hold Berkshire Hathaway stock, and even long after Buffett exits the company the company will still be able to tout the same plan and strategy.  Buffett has been against stock splits in the past.  The notion that it makes brokerage commissions come up for debate is an argument of yesteryear.  Almost anyone can now buy shares for close $10.00 all in on commission whether they buy 100 shares or 2,000 shares.  Back in the 1960’s and 1970’s, brokers could charge commissions of 2% or 3% going in.  That day is long gone.  Even in the 1980’s Buffett minded that stock splits draw in short-term traders, yet the $100,000+ mark has reached a point that it is unattainable for most of the public.  The notion that it was once $150,000.00 does not change that argument.

There was once a nation that Berkshire Hathaway should be treated as a mutual  fund rather than an operating company.  This BNSF deal changes that notion entirely, and this move may tend to lead Berkshire Hathaway to owning more operations outright at the expense of just buying and holding common stocks of large US companies.

A split is technically a non-event on true fundamentals.  But at this point it has finally become a stock that the public can own.  The stock has underperformed against the market during the entire recovery.  Buffett still needs to remind these people that he is not going to beef up an investor relations effort nor will he change his accounting and reporting stances.  The public investing in Buffett and Berkshire Hathaway has to know that the transparency is often going to be less here than at other financial and/or conglomerate operations.

It might be easier to ask Buffett to go ahead and split the A-shares than it would be to divide the A-shares out to receive dividends.

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JON C. OGG

LISTING DETAILS: The Class A Combined Units are listed on the Toronto Stock Exchange under the symbol TBP.A; the Units and Warrants making up the Combined Units will separate immediately after the earlier of the closing of the final exercise of the over-allotment option granted by the Fund to its agents or 30 days after the closing of the initial public offering. Following such separation, the Class A Units and the Class A Warrants will trade on the Toronto Stock Exchange under the symbols TBP.UN and TBP.WT, respectively. Each Warrant entitles its holder to purchase one Unit of the class at a subscription price of $10.00 (or US$10.00 in the case of a Class U Warrant or a Class I Warrant) on April 29, 2011. Warrants may be tendered for exercise on and after April 18, 2011 and up to April 29, 2011 (being the two-week period up to and including the expiry date for the Warrants).  Warrants not exercised by April 29, 2011 will be void and of no value.

The goal and objective of the fund is to “provide investors with the opportunity for long-term capital growth by providing access to the energy-related investment strategies of TBP Investments Management LLC.”  The Fund will invest the net proceeds of the offerings in an actively managed portfolio consisting primarily of equity and commodity-related investments in the energy and energy-related sectors.

The Portfolio Manager and its management team are led by T. Boone Pickens.  TBP Investments Management LLC, had total assets under management of about $400 million as of September 30, 2009.  The Fund may utilize leverage through use of a loan facility or margin purchases, in an amount of up to 30% of the NAV of the Fund at the time of the borrowing.  Portfolio Investments from the prospectus are as follows:

• The Portfolio Manager believes that over the long-term, the oil and gas sector will provide a favourable environment for growth and attractive investment opportunities due to a combination of depleting oil and gas reserves, global demand growth and ongoing geopolitical instability. In the near to mid-term, the Portfolio Manager believes that recent reductions in planned capital spending, as well as decreases in oil and gas production by the Organization of the Petroleum Exporting Countries, will result in production shortfalls that will provide support for oil and gas prices.
• The Portfolio Manager expects that the Fund’s equity investments will typically consist of liquid stocks that trade on major exchanges, with the majority of equity investments being in U.S. and Canadian companies. Sectors included in the energy and energy-related universe include integrated energy companies, energy service companies and drillers, exploration and production companies, refiners, energy dependent companies and alternative energy companies.
• Commodity exposure will generally be acquired through liquid futures and option contracts that trade on the New York Mercantile Exchange or over-the-counter. Futures investments can be expected to be focused on natural gas, Brent Crude and West Texas Intermediate (WTI) crude oil.

The offering syndicate was led by BMO Capital Markets, and the syndicate included the following: CIBC, RBC Capital Markets, TD Securities Inc., Blackmont Capital Inc., Canaccord Financial Ltd., Desjardins Securities Inc., Dundee Securities Corporation, HSBC Securities, Raymond James, GMP Securities, Manulife Securities, Wellington West Capital Markets, and Research Capital Corporation.

Pickens recently just shut down the plans for his huge wind power project in northern Texas.  The size of this fund might not make a great all around week for him.  Maybe Pickens should have thrown in an IPO plug-in his new commercial campaign for the Pickens Plan.

You are invited to join our free daily email distribution list to hear about IPOs and secondary offerings, ongoing day trader and options trader alerts, analyst upgrades and downgrades, stock and market rumors, Buffett and guru investor news, M&A and more.

JON C. OGG

Terms of the spin-off will be 1 share of the new Madison Square Garden Class A stock for each four shares held of Cablevision Class A shares held as of the record date.  The company is keeping the same Class A and Class B share structure, and the Class B ratio is the same as for Class A.  Class B shares are not exchange-traded, and the control of MSG will remain under the Dolan family control via the Class B shares.

The company noted that fractional shares of MSG common stock will not be distributed to Cablevision stockholders, and those holders who would have received fractional shares will see those shares aggregated and sold in the public market.  After that, the proceeds will be distributed pro rata in cash to the holders who would have otherwise received a fractional share.  The company also noted that this has been designated as a tax-free spin-off and no action is required by holders to see this come to pass.

Cablevision Class A common stock will continue to trade “regular way” on the New York Stock Exchange under the symbol “CVC” before and after the spin-off.  Those holders of Cablevision Class A common stock who sell Cablevision shares regular way on or before February 9, 2010, will also be selling their right to receive shares of MSG Class A common stock.  Cablevision’s Class B common stock is not listed on a securities exchange.  MSG Class A common stock will begin trading on a “when-issued” basis as “MSGNV” on NASDAQ on January 25, 2010; on February 10, 2010, the stock begins trading under the symbol “MSG.”

The business of Madison Square Garden consists of MSG Sports, MSG Entertainment and MSG Media.  This might not be as good as going back in time and getting holders to agree to that $36.36 go-private management buyout from the Dolans, but it will have to do for now that the private equity bubble has burst.  It will be interesting to see if Mario Gabelli of GAMCO Investors, Inc. (NYSE: GBL) will be as vocal on this spin-off as he was against the Dolan-led buyout offer back during the private equity bubble.

JON C. OGG