Berkshire's Latest Gamble Spot-On: Poll

Berkshire's $1.3 billion gamble on Swiss Re's low-return, U.S. life reinsurance business will pay off, according to readers of <I>TheStreet</I>.
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NEW YORK (

TheStreet

) --

Berkshire Hathaway's

(BRK.B) - Get Report

$1.3 billion gamble

on

Swiss Re's

low-return, US life reinsurance business will indeed pay off -- at least, that is, according to readers of

TheStreet.

More than 93% of the 1,648 poll-takers said that Berkshire's gamble on Swiss Re will ultimately reap rewards for Berkshire Hathaway. As usual, Buffet's approach to investing in undervalued businesses appeals to many investors.

Less than 7% of

TheStreet

users believe that Buffet made a bad call in purchasing a block of Swiss Re's underperforming US life reinsurance business.

Buffet's decision to enter a deal with Goldman Sachs amid the financial maelstrom is just the latest example of his daring investment approach.

In Sept. 2008, Berkshire paid $5 billion for Goldman Sachs preferred shares with a 10% dividend and warrants for 43.5 million common stock shares for $115 per share. At the end of the market on Friday, Goldman Sachs closed at $148.72, indicating that Buffet is already sitting on about $1.5 billion profit for the warrants.

Of course, Buffet, being human, can also miscalculate. Last year, Berkshire divested part of its ConocoPhillips investment at a significant loss, resulting in a $3 billion pre-tax charge, or $1.9 billion after-tax. Buffet made the call to invest in the energy company unaware that oil and gas prices were, at the time, peaking.

In Buffet's annual letter to shareholders last year, in relation to the ConocoPhillips investment, he said his expectation of the movement in oil and gas prices was dead wrong and blamed the terrible timing of the purchase.

This bad call contributed to Berkshire's worst loss in 20 years.

Of course, one of the year's most-talked-about deals is Berkshire's decision to buy railroad

Burlington Northern Santa Fe

(BNI)

for $26 billion.

The deal has been supported with a shareholder-approved 50-fold stock split on Berkshire class-B shares. This move expands the pool of investors who are able to consider adding the Berkshire B shares to their portfolio; the shares were trading as high as $3,400 before the split.

On January 26, Standard & Poor's said Berkshire Hathaway will replace Burlington Northern Santa Fe in the S&P 100 and S&P 500 indices, only further increasing demand for the stock. Since the news broke on Tuesday, the share price has jumped from its Tuesday close of $68 to a Friday close of $76, up 11.8%.

-- Reported by Andrea Tse in New York

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