Buffett's S&P 500-bound Berkshire could get late boost from index funds

For investors holding shares in Berkshire Hathaway Inc., Friday might be a very lucrative day. Today marks the last trading day before Warren Buffet's investment vehicle gets added to the S&P 500. Berkshire's listing in the benchmark index commences Tuesday, the next trading day for U.S. markets.
MAR 08, 2010
For investors holding shares in Berkshire Hathaway Inc., Friday might be a very lucrative day. Today marks the last trading day before Warren Buffet's investment vehicle gets added to the S&P 500. Berkshire's listing in the benchmark index commences Tuesday, the next trading day for U.S. markets. Wall Street has been closely monitoring the price of Berkshire stock since Jan. 26, the day Standard & Poor's announced that the company's B shares would be added to its index. Before the announcement, Berkshire B shares were trading at around $68. The stock has had a nice run-up since then; it entered this week trading at around $73. But Berkshire's inclusion in the index means that managers of index funds that track the S&P 500 must purchase the B shares. Typically, index buying occurs on the last day before a stock enters the S&P 500. If that holds true today, shares of Berkshire could pop, particularly toward the end of the trading day. In late afternoon trading, Berkshire B shares were going for close to $77. Trading volume also figures to be heavy. Earlier buyers of Berkshire's shares — hedge funds and arbitragers, in particular — may be planning to cash out today, profits in tow. Berkshire Hathaway's entry into the S&P 500 came about, in part, because of the stock split that was approved by shareholders in January. Prior to the 50-to-1 split, daily trading volume in Berkshire stock was light – understandable, given its share price or roughly $100,000. Berkshire is replacing BNSF Railway Co. in the S&P 500, a neat bit of business since the company is purchasing BNSF, the nation's second-largest railroad. The $26.3 billion acquisition is slated to close today. It turns out that Friday could be a good day for Mr. Buffett, too.

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