Possible meanings for the changes in stock price for Berkshire Hathaway and Scottish Power would be that the markets responded well to the fact that Berkshire Hathaway would acquire the electric utility PacifiCorp. By Acquiring it their stocks gained a market value of $2.55 billion, and Scottish Power’s share price went up 6.28%. It also had an impact on how people perceived Warren Buffet. In the graph below you can see that Scottish Power stocks were at a plateau from February 21st 2005 to around April 18th 2005 and then dramatically increases around the 25th of April. You can also see on the graph that Berkshire Hathaway was a steady decrease until around the same time Scottish Power stock price went up. I think that Berkshire Hathaway is performing very well. As of right now Berkshire Hathaway has regularly outperformed in the market since it started back in 1965. In 1977 the firms price of a stock was $107, but on May 24, 2005 the price of the class A shares was $85,500. Berkshire’s wealth has had a steady increase of wealth by about 24% since 1965. And that 24% is more than double the average price of other large stocks at around 10.5%. As stated previously the company had a rough start and was declining steadily at first which they say was caused by inflation, technological changes and intensifying competition from …show more content…
He also expands on that by saying an investor is indeed buying something for what it is worth and is therefore truly operating on the principle of obtaining value for his investments. He also talks about how the cheapest investment is the one that the investor should purchase. The proxy that Warren Buffett rejects for intrinsic value is book value. The reason why he rejects book value is because it does not reflect the actual economic reality, and it also does not focus of prospective rate of return and how that differs from the required rate of