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Enter cheaper stock derivatives instead of the stock itself

Discuss Enter cheaper stock derivatives instead of the stock itself within the Stock Markets Tips & Gyan !! forums, part of the Quiz , Marketplace and Community games category; you can invest in stock warrants of individual blue chip companies for a fraction of the capital involved to buy ...

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Claude90
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Enter cheaper stock derivatives instead of the stock itself - November 24th, 2008

you can invest in stock warrants of individual blue chip companies for a fraction of the capital involved to buy the blue chip itself. One very successful secret in investing in stock derivatives is to be an invited participant in stock derivatives private placement exercises.
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sara.corner007
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Re: Enter cheaper stock derivatives instead of the stock itself - December 4th, 2008

Is Berkshire Hathaway Finally A Cheap Stock? (BRK-A)

This weekend, Barron's wrote an article noting that shares of Berkshire Hathaway Inc. (NYSE: BRK-A) were finally cheap. After closing at $90,000 on Friday and seeing a low of $74,100 last week, the publication believes that the stock looks cheap. Keep in mind that over the last year or so shares have traded as high as $150,000.

Barron's does note the concerns over the valuations which have dogged the stock. Its public stocks were valued at roughly $76 billion as of September 30 (even less now) and it also had many put options on about $37 billion worth of equity indexes. Barron's estimated that the company has lost about $5 billion on a mark-to-market basis, but believes the stock has been over-punished for it. It also noted the company's Triple-A rating and $140 billion stock market value. It also noted that it trades at 2.3-times shareholder equity rather than ratios of 20-times at many other financial companies.

Barron's noted how it took heat a year ago saying the stock had peaked out, but it now believes it looks like the time to buy. We agree that the sell-off seems overdone, although the caveat of the day is that sell-offs are going beyond logic and the investor exodus from equities and corporate exposure is likely to continue even if we get some steep and sharp bear market rallies.

The publication put Berkshire Hathaway's book value at around $66,000, down about 14% from the September 30 level. This is hard to get an exact reading on because of the derivatives and because of the recent investments which Mr. Buffett has made changes even since his September 30 filing date.

Shares have rallied more than 15% from the lows of Thursday to Friday's close. Rally or no rally in the stock market, that is very impressive and worth noting. We do not think that Berkshire will run up as high as many other more leveraged and high-beta stocks if the market makes any sharp moves to the upside. But we also do not see the company having as much risk to the downside for the time being. Its last earnings were dismal, but hurricane season is now behind the company until next summer.
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