Berkshire Hathaway: How has it performed since Buffett’s donation to the Gates Foundation?

It’s been a while since I blogged about Berkshire Hathaway’s performance after Warren Buffett donated approximately $29.6 billion of its stock to the Bill & Melinda Gates Foundation.

And, as I sold my class B share yesterday, this post is likely to be the final update. (My sale has nothing to do with the turbulent market conditions or Berkshire Hathaway: the best time to sell a stock is when you need the money; my wife and I are in the process of buying a house.)

I sold my share yesterday for $3,963.03 (less fees and commissions, costs that need to be considered when reviewing a stock’s performance). I purchased it for $2,996.74 (including $9.99 commission) on June 26, 2006, giving me a profit of $966.29.

In the 17 months that I owned it, it reached a high of $4,950 and a low of $2,990.

Most importantly, I made 30 percent on my money over that period. If I’d invested in the S&P 500 index (my benchmark of choice), I would’ve lost about 25 percent. The following graph compares Berkshire Hathaway Class B’s performance (in blue) with that that of the S&P 500 index (in red) during the time I owned it. Select the thumbnail to see a larger version of the graph.

(Graph from Yahoo! Finance)

Berkshire Hathaway—beating the market since Buffett’s donation to the Gates Foundation

To support international development and make some money, I purchased a class B share of Berkshire Hathaway shortly after Warren Buffett announced that he was donating most of his wealth to the Bill & Melinda Gates Foundation (detailed reasons for my purchase are here).

I figure the time is right for an update: I bought the stock on June 26, 2006 for $2,996.74 (including $9.99 commission). As of this morning, before the market opened, it is trading at $3,210.00—an increase of 7.1 percent.

And, to follow the Motley Fool’s guidance to benchmark your results, during the time that I’ve owned Berkshire Hathaway, the S&P 500 has increased by just 5.0 percent.

Full disclosure: Berkshire Hathaway is the only stock in my portfolio doing this well.

The Economist on Buffett’s donation to the Gates Foundation

The July 1, 2006, issue of The Economist has three articles on Warren Buffett donating his billions to The Bill & Melinda Gates Foundation. They include analysis of the problem I wrote about last week: will the Gates Foundation be able to absorb all of that money and still be effective?

• Billanthropy: How to spend money and influence people (subscription required)
• The new powers in giving: Warren Buffett has joined Bill and Melinda Gates to create the world’s biggest charitable foundation. The hard part will be giving their money away well
• How to spend it: Where money could have the biggest effect on global health

Have Bill Gates and Warren Buffett in your portfolio while benefiting international development

While I was writing my entry yesterday about Warren Buffett donating approximately $29.6 billion of Berkshire Hathaway stock to the Bill & Melinda Gates Foundation, I realized not only would this contribution be good for the health and education of people worldwide, but it also should benefit investors. (Before I was a writer and editor, I was a supervisor in customer service for a large brokerage firm and bank.)

As Buffett’s gift to the Gates Foundation is 10 million Class B shares of Berkshire Hathaway stock—not cash—both Bill Gates and Warren Buffett now have an interest in increasing Berkshire Hathaway’s stock price.

Hence, by buying Berkshire Hathaway, you now have the world’s richest and second richest men working on your behalf. Plus you push up the share price, helping the Gates Foundation get more money when it does sell some of the stock and, therefore, benefit international development. Admittedly my purchase of one share won’t do much, but it does help.

Furthermore, I figured the stock price would go down today, as people would sell their stocks upon hearing that the Oracle of Omaha’s was divesting himself of 85 percent of the company.

As I anticipated, shares of Berkshire Hathaway Class B (1/30 the ownership of a Class A share, which trades around $90,500) fell as much as $88 to $2,983 from its close on Friday. I bought it for $2,986.75 (not including the $9.99 commission).

And, as I also anticipated, other people like me were waiting for the drop and looking to buy: at the closing bell it had rebounded to $3,043.01, losing $19 on the day, but giving me a one-day return of 1.5 percent, although I have a long-term investment approach (confession: Berkshire Hathaway is a stock I’ve been considering buying for a few months).

Not a bad start though.

Buffett to donate approximately $29.6 billion to the Gates Foundation

Warren Buffett, the chairman and CEO of Berkshire Hathaway and the world’s second richest person, said he will donate 85 percent of his stock in his company to charity according to news reports. The Bill & Melinda Gates Foundation, which is “dedicated to bringing innovations in health and learning to the global community,” will receive 80 percent of Buffett’s donation.

The New York Times estimates Buffett’s total charitable donation (based on the current stock price of Berkshire Hathaway) to be $37 billion, meaning the Gates Foundation will receive about $29.6 billion.

Kudos to Buffett (who’s renowned for not spending any of his vast wealth) for giving away so much money. But, while the Gates Foundation probably is one of the most effective charities working in international development, will it be able to use all of that money effectively? Or, as with Doctor’s Without Borders after the 2004 tsunami, will the large sum give the Gates Foundation more funds than it can use?

Of course, with Bill Gates set to leave Microsoft in 2008 to run the Gates Foundation full time, maybe Buffett made another wise investment.