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Why Buffett bought BNSF and did stock split?

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buffett burger

I can think of a few reasons:

1) He sees value in BNSF;

2) He want to use some cash so that his successor won’t have too much cash to squander (this is legit considering his age, and a lot of times people make mistake when they are rich);

3) Last but most important, financial crisis taught Buffett a lesson: liquidity is very important. GE and GS got his endorsement and got cash by issuing stocks in one day. Buffett could not do that before buying BNSF and the stock split. Now he can. BRK is S&P component, much more widely held. “Get access to capital market” is one reason Goldman went public in 1990s.

I think Buffett only said 1. But I think 2 and 3 are also the factor here. Remember Buffett was against stock split up to this BNSF deal. Although he said publicly splitting Berkshire stock is for small BNSF shareholders, a valid point. Nonetheless I would be astonished that was the only reason to overthrow 40 years belief/rule in one deal.

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CROX Pre-split run

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The split day is June 14, Thursday. It has a nice run since last week. I will wait it calm down a bit before adding my postions. Obviously, I missed the buying opportunity about two weeks ago when there were some insiders sellings. It pulled back to 76~78 at that time. Oh well, no rear mirror view for stocks.

A bit reality check, Crocs 2006 Revenue is 354.7 m; 2007 est. Revenue 675 m, a 90% growth, note the company says sustainable growth rate over next few years is 45%. The market cap as of today is 3.64 b (stock closed at $90.97), so the P/S ratio is roughly 5.39. PE (ttm, trailing twelve month, according to Yahoo Finance) is about 44.77, I think it’s fairly valued at this time.

Also as you may know, President Bush was wearing Crocs. You can see a picture of him wearing Crocs (courtesy of CrocFans).