Yes because the company the acquired may have purchased the stock at a price that fit with Berkshire’s previous purchase prices based on their own internal financial assessments.
The price at which the stock was purchased shouldn't really affect decisions about the portfolio, should it?
As I understand it, from the perspective of a rational investor, inheriting a stock and not selling it is the same as inheriting the equivalent amount of money and buying that stock.
Selling the stock means capital gains tax. In addition to buying the business presumably for its own intrinsic reasons Berkshire may want to increase its position in Apple with a long term price target of say, idk, $500/share within 10 years (just making something up here) and getting the stock at $50/share versus $150 on the open market may have made sense to them.
If the stock would have otherwise been sold off like the others, then it's not really different because the price is higher now than it would have been.
E.g. Allegheny selling AAPL + Berkshire buying AAPL == Berkshire buying Allegheny
(Assuming a perfect market, which isn't the case but I don't feel qualified to say what the other effects would be)
Part of it is: If you wouldn't buy a stock at the current price, why wouldn't you sell the stock at the current price? Shouldn't the band where you do neither be very narrow?
But the bigger part is: Why do you care what someone else paid? All that should matter is what you are paying for this acquisition, especially if you're only keeping the AAPL.
> If you wouldn't buy a stock at the current price, why wouldn't you sell the stock at the current price?
Taxes, portfolio position, longer-term price horizons, etc. Many business factors could potentially be at play. Why pay $150/share on the open market today for something you want to hold if you can get it for much cheaper?
The fact that they added to that position though demonstrates that the considerations are not just today's price.
> Why pay $150/share on the open market today for something you want to hold if you can get it for much cheaper?
Did they pay much cheaper? If so, why wasn't someone else bidding up Allegheny?
But that still doesn't explain why you wouldn't sell if you think it's worth significantly less than $150. Even if you only paid $2! But if you think it's close to $150 then the other factors make sense.
Either way, I don't see how it matters what Allegheny paid for the stock.
> If so, why wasn't someone else bidding up Allegheny?
Because then they have to buy it?
> But that still doesn't explain why you wouldn't sell if you think it's worth significantly less than $150. Even if you only paid $2! But if you think it's close to $150 then the other factors make sense.
I think the issue is your assumption that they think it’s worth less than $150 and you aren’t factoring in time or potential business factors that will influence the price, or risk for a so citric portfolio size or exposure.
I would love to "have to" buy a bunch of apple stock at much less than the current trading price! Most companies would also love that.
> I think the issue is your assumption that they think it’s worth less than $150 and you aren’t factoring in time or potential business factors that will influence the price, or risk for a so citric portfolio size or exposure.
I'm not assuming that, I'm just wondering why they wouldn't buy more if they think it's worth much more.
If they think it's worth quite close to $150 I can see why they wouldn't bother. But that leads back to me being confused on why they bought more in this indirect way, because if they got a big discount I don't understand why.
As I understand it, from the perspective of a rational investor, inheriting a stock and not selling it is the same as inheriting the equivalent amount of money and buying that stock.