Tags: warren | buffett | decline

Buffett Watch: What Happened to Berkshire?

By    |   Tuesday, 28 Oct 2008 11:48 AM

Turns out, Doug Kass was right.

On June 5, the hedge fund manager and short seller took the bold step of publicly saying investors should short Warren Buffett’s holding company, Berkshire Hathaway.

Echoing a December 2007 Barron’s cover story, Kass took issue with the notion that Buffett’s picks — big brand names like Coke, Kraft, and American Express — were relatively immune to downturns.

Barron's said then that Berkshire should decline by 10 percent, to $132,000. Shortly after the article appeared, investors sold and Berkshire dipped below that, then recovered to just over the mark.

Take your pick: Either Barron's was right, or people who read Barron's take the weekly investing newspaper too seriously.

In the end, Berkshire fell just the same.

Kass, who manages the short-only hedge fund Seabreeze Partners, took it a step further. He thought $132,000 was still too high.

By shorting Berkshire, Kass would profit only if the price of one of America's most revered stocks — managed by America's most revered investor — fell.

And fall it did. Berkshire now trades at $103,700 — a 21.4 percent drop in less than five months.

Again, take your pick: Either Berkshire's holdings are not as recession-resistant as Buffett believes (and, noted, he is famous for holding stocks for decades or longer, right through bear markets), or investors are so fundamentally confused and afraid that they walked away from even Warren Buffett.

In the end, Berkshire fell just the same.

“Compared to the S&P's 42 percent drop so far in 2008, Buffett looks relatively good,” writes Peter Cohan, editor of The Cohan Letter, on BloggingStocks.com

“Does Berkshire have further to fall? I don't know, but I'd be more bullish on Berkshire if Buffett uses some of his cash to buy up more shares at today's lower price.”

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Turns out, Doug Kass was right.On June 5, the hedge fund manager and short seller took the bold step of publicly saying investors should short Warren Buffett’s holding company, Berkshire Hathaway.Echoing a December 2007 Barron’s cover story, Kass took issue with the notion...
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Tuesday, 28 Oct 2008 11:48 AM
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