Many know Warren Buffett only for his calls for higher taxes on the wealthy and for his campaign to get fellow billionaires to donate much of their wealth to charity. For many decades, though, he’s helmed Berkshire Hathaway (NYSE: BRK-B). You might want to consider it for your portfolio.
Under Buffett’s leadership, Berkshire has risen from about $12 per share in 1965 to more than $116,000 per share recently. (Those are the class-A shares; we small investors can grab class-B shares for roughly $77 apiece.) The company’s growth has slowed over time, but it’s still attractive.
For starters, there’s diversification. It owns dozens of companies, including a lot of insurers such as GEICO. There are also handfuls of furniture, jewelry, media, energy and housing-related companies, as well as such diverse businesses as Fruit of the Loom, Dairy Queen, See’s Candies, Benjamin Moore, The Pampered Chef and Burlington Northern Santa Fe railroad. Through stock, Berkshire owns 5 percent of IBM, nearly 7 percent of Wells Fargo and more than 8 percent of Coca-Cola, among many other holdings.
Berkshire Hathaway may not double overnight, but it can help you sleep well at night. (The Motley Fool owns shares of Berkshire Hathaway, IBM, Wells Fargo and Coca-Cola.)
Ask the Fool
Q: If I inherit stock when a relative dies, am I taxed on the gains? – C.L., Monticello, Minn.
A: You’re taxed on gains only when you sell. But to calculate your gain then, you’ll need to know your “basis” in the stock. That’s treated differently for gifts and inheritances (received from someone’s estate).
With a gift of appreciated stock or property, your basis is the same one that the giver originally had. So you’ll need to try to trace the cost all the way back to when the giver bought the asset. This can sometimes be hard.
With an inheritance, you get a “stepped-up” basis. Your basis is the fair-market value of the stock on the date of death of the donor. The estate’s tax return should disclose the value of the stock at date of death.
Alternatively, if you know the date, you can get the stock price online at various sources (such as finance.yahoo.com), or even by calling your broker or the company’s investor relations department and asking.
Once you determine the value, back up your findings on paper, in case the IRS wants to double-check (read: audit) your tax return one day. Learn more at tax.fool.com and irs.gov.
My smartest investment
My almost-dumbest investment was many years ago, when my broker tried to convince me to sell some 14 percent zero-coupon bonds (remember those days?) and buy some fund he was pushing.
I dumped him and his firm instead and did my own research.
My best investments over the years were a few stocks that tripled. In each case, as they ran up, I would sell amounts about equal to my original cost on each run-up. If they ultimately collapsed (some did), I would have at least captured some profit.
My latest investment has been Apple, which I sold in parts all the way up, making a nice profit and with still a nice holding for the long term. – W.C., Syracuse, N.Y.
The Fool responds: That’s a conservative, but not crazy, move, selling a portion of your big winners.
Regarding your broker, some brokers do make solid recommendations, but it’s always good to find out if they will receive a commission for products sold to you.