Best in Class: Berkshire Hathaway

Conventional market wisdom dictates that the biggest-cap names are usually the slowest to regain footing in a recovering economy.

This market dynamic played out last year, as the most beaten down, smaller-cap names recovered by wide margins. In the case of Berkshire's public securities portfolio, this market dynamic suggests that Berkshire's underperformance of the broad markets in 2009 may just mean its public securities are more attractively valued in a later stage of the economic recovery.

Morningstar's Bergman noted that it is possible to construct many 12-month intervals during the past 15 years when the S&P 500 outperformed Berkshire shares.

What's more, in each annual interval, the S&P 500 has outperformed Berkshire a third of the time. However, over the past 15 years Berkshire Hathaway shares have outperformed the S&P by a factor of two times.

"If we had $20 million in new money coming through the door in the next 90 days, based on where the Berkshire stock is trading now, there is a pretty good likelihood we would buy more," Oak Value Fund's Coates said.

The recent stock split may not matter in what makes Berkshire Hathaway unique as a security. It also doesn't impact the argument as to whether Berkshire Hathaway is presently positioned as one of the market's most attractively valued equities. However, Coates does think that all the talk about the S&P 500 adding Berkshire will prove correct. And if that happens, the most important repercussion won't be all the index funds buying Berkshire, but that Berkshire will suddenly become a big factor in investor benchmarking.

"If you don't invest in Berkshire, you will effectively be shorting the company, making a bet against Buffett," Coates argues.

As a result, there is likely to be much greater research coverage of Berkshire Hathaway. "Berkshire is a company where if you go to a cocktail party, everyone has an opinion, but a very small number of them are qualified to have one. If the byproduct of the stock split is that it eliminates the disincentive that exists for research coverage, then maybe it does benefit us, perhaps leading to a reduction in the current discount," Coates said.

Courtesy of the Berkshire Hathaway stock split, the party invite list just got a lot bigger. And if you believe the Berkshire bulls, it's time to RSVP: there is still, it seems, a long way to go before the current discount in Berkshire Hathaway shares is eliminated.

-- Reported by Eric Rosenbaum in New York.

RELATED STORIES:

>>Buffett for Everyone; Berkshire Spikes

>>Buffett Revises B Share Discount Trigger

>>Is Berkshire a Better Arb Play After Stock Split

>>See our new stock quote page.

Follow TheStreet.com on Twitter and become a fan on Facebook.

>To order reprints of this article, click here: Reprints