Lessons From Passing on Berkshire Hathaway Stock at $97: Rod MacIver
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Veteran investor Rod MacIver passed on Berkshire Hathaway at $97 a share. Here's what he learned from the mistake, and why he thinks Warren Buffett's stock portfolio needs a major overhaul

warren buffett
Warren Buffett.
REUTERS/Rick Wilking

  • Rod MacIver declined to invest in Berkshire Hathaway at $97 a share in 1982.
  • If the money manager bought $10,000 of stock, it would be worth $44 million today.
  • MacIver outlined what he learned, and called for Warren Buffett to overhaul Berkshire's portfolio.

Rod MacIver passed up the chance to buy Berkshire Hathaway stock at $97 in 1982. A single "A" share of Warren Buffett's company trades at north of $420,000 today, meaning MacIver lost out on a roughly 430,000% gain — a compound annual growth rate of 24% over 39 years.

The veteran stock-picker reflected on missing the opportunity of a lifetime, shared what he learned from the experience, and suggested Buffett should revamp his investment strategy and stock portfolio in an interview with Insider this week.

Passing on Buffett

MacIver originally shared his story in a MicroCapClub post in 2015. The investor had dropped out of high school and left home at 15 to fight fires in Canada, buy and sell real estate, and ultimately become a money manager by the time he reached his mid-20s.

When Berkshire came across his desk in 1982, he was looking to deploy a bunch of cash from a successful real-estate investment. However, he decided the conglomerate's stock price was too expensive at almost $100. "I'll wait, I thought, until it hits $60," he wrote. "I'm still waiting."

MacIver — who later started an investment-research firm that counted George Soros, Seth Klarman, and Sam Zell among its clients — detailed his main takeaways in the blog post. He advised investors to look for companies that are growing, generating high returns on capital, and have little debt, as markets generally shift capital from mediocre businesses to high-quality ones.

Investors should also wait until a prospect becomes cheap before buying it, lean into their competitive advantages, and incorporate their tolerance for risk, inactivity, and holding period into their  strategies, MacIver added.

MacIver regrets missing out

MacIver told Insider that he knew about Buffett in 1982, but the investor was nowhere near as famous as he is today.

"I just thought of him as a very smart guy in a field of very smart people who was achieving exceptional returns," MacIver said, adding that he had some doubts at the time about Buffett's purchase of a failing New England textile mill named Berkshire Hathaway some years earlier.

A broker told MacIver that Buffett was an exceptional investor and Berkshire's valuation was justified, but the money manager didn't see it.

MacIver was managing between $5 million and $10 million at the time, and probably would have invested $10,000 or $20,000 into Berkshire if he'd seen its potential, he said. A $10,000 bet would have netted him 103 shares, now worth $44 million, while $20,000 would have bought 206 shares worth $88 million today.

The money manager noted that he probably would have cashed out the shares sometime over the past four decades, as he's only held one stock for longer than 30 years. However, that doesn't stop him from kicking himself.

"Hell yes I regret not buying Berkshire Hathaway at $97 a share," MacIver said. "I just thought that it would decline in value, that it was overpriced."

Buffett's stocks aren't the best

MacIver applies the lessons he took from missing Berkshire as an individual investor today. He focuses on growing, US-listed, low-or-no debt companies. He aims to buy into stocks that have upward momentum, and sell them when the tide turns.

"The primary element of a quality company is that it can grow rapidly without taking on debt. They don't have to build plants or buy equipment, they don't need inventory," MacIver said. "I'm willing to pay a lot of money now for that versus 40 years ago."

The investor expressed surprise at some of the biggest positions in Buffett's portfolio today. Bank of America and Kraft Heinz aren't high-quality companies, Coca-Cola's glory days are behind it, and owning the "big four" airlines prior to the pandemic was a puzzling decision, he said. Past Berkshire holdings such as Ogilvy & Mather, the legendary advertising agency, were far more compelling in his view.

Buffett may have grown less discerning with his stock picks, and might be placing macroeconomic bets instead, MacIver said.

"It's almost like he's decided that his best strategy is to invest in the future of America, and not even worry about the quality of a company," he said. He pointed out that Buffett has a wider margin of error than many rivals as he can use "float" from his insurance companies — premiums that haven't been paid out as claims yet — to invest at a minimal cost of capital.

Buffett may have decided, "'I'm just going to buy things that are a royalty on the US economy, at a low cost of capital, and it's just gonna work out,'" MacIver said. "'If I die tomorrow, I don't wanna leave behind a portfolio that it takes a genius to manage.'"

MacIver suggested that Buffett should buy higher-quality companies, or "just invest in the S&P 500 and call it a day and not have to worry about buying or selling."

In other words, Buffett risks making the same mistake that MacIver made nearly 40 years ago — refusing to pay a little more for an enduring, high-quality company.

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