Berkshire Soars as the Dow Inches Higher

The Dow Jones Industrials are aiming for their sixth straight day of gains, and the attention today is divided between the Federal Reserve's policy meeting and ongoing wrangling over fiscal-cliff negotiations. So many times in the past, investors have gotten big gains by buying in advance of Fed decisions to continue or add to existing stimulus programs, and that seems to be the consensus view today, as the Dow is up about 10 points as of 10:45 a.m. EST.

But the big news-maker this morning was Berkshire Hathaway , which soared 2.5% on news that the Warren Buffett-led company had bought a billion-dollar block of shares from the estate of a longtime investor at prices above its former limit of 1.1 times book value. In a press release (link opens PDF), Berkshire said it was now authorized to buy back shares at up to 120% of book value, raising the level of the perceived floor on the stock price. With shareholders having long bemoaned Berkshire's inability to reach its true intrinsic value, future Berkshire repurchases could help bolster confidence in the stock.

Among Dow stocks, Wal-Mart fell almost 2.4%. Yesterday, CEO Mike Duke told the Council on Foreign Relations that the fiscal-cliff debate is causing consumers to rein in their holiday spending as public awareness of the crisis rises. With Duke citing figures that 15% of its core customers said the cliff would affect what they spend this holiday season, investors are clearly concerned that, barring an improbable solution before Christmas, Wal-Mart's busiest time of year might fall short of expectations.

Finally, DuPont led the Dow's gainers, rising almost 2%. The chemical company gave earnings guidance for the full 2012 year at the high end of forecasts, spurring investors to believe that its recent drops have made the stock cheap. DuPont also said it would buy back shares.

Is it time for Berkshire to shine?
Berkshire's buyback move may push the stock higher today, but with Warren Buffett well into his 80s, long-term investors wonder how long the stock can keep up its winning ways. To help investors, The Fool's resident Berkshire Hathaway expert, Joe Magyer, has created a new
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Fool contributor Dan Caplinger owns shares of Berkshire Hathaway. The Motley Fool owns shares of Berkshire Hathaway. Motley Fool newsletter services recommend Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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