Alternatives to Common Stock Summary and Analysis

Berkshire Hathaway's insurance companies maintain three permanent common stock holdings and several marketable securities selected from five categories. In addition to short-term arbitrage, Buffett can select short-term cash equivalents, medium-term fixed income and long-term fixed income securities and long-term common stock investments. His criteria measures mathematical expectations of highest after-tax returns to maximize net worth in the long run. Buffett claims "lethargy bordering on sloth" as an investment style. For example, they make no purchases or sales of stock in five of Berkshire's six major investments in the last year. Wells Fargo is a major holding they increase in 1989 and 1990 to almost 10%. Buffett dislikes banking because of its leverage. However, Wells Fargo is exceptionally well-managed and $290 million purchase price is less than five times after-tax and three times pre-tax earnings. Despite investment quality, Buffett fears...