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Money Manager Sosnoff: 'You Don't Want Buffett for Stock Picking Now'

Money Manager Sosnoff: 'You Don't Want Buffett for Stock Picking Now'

By    |   Wednesday, 19 August 2015 06:03 AM

With several of Berkshire Hathaway's biggest public-stock holdings now sucking wind, Martin Sosnoff, CEO of money manager Atalanta Sosnoff Capital, offers a bold critique of legendary investor Berkshire's CEO Warren Buffett.

"You don’t want Buffett at this stage in his career for stock picking," Sosnoff writes on Forbes.com.

"Rather, his investment banking and deal prowess is now the existential core of his closing career years."

Sosnoff cites the favorable terms Buffett received for investments in Goldman Sachs and Bank of America during the 2008-09 financial crisis.

He's likely also referring to Berkshire's deals to take over Heinz, to merge Heinz with Kraft and the deal announced this month to take over Precision Capital.

Berkshire's third biggest holding Coca-Cola, its No. 4 holding IBM, its No. 5 holding American Express, its No. 6 holding Wal-Mart and its No. 7 holding Procter & Gamble have underperformed in recent years.

"Buffett’s Berkshire legacy is a collection of sound operating companies, and an equity portfolio that sells at a reasonable valuation," Sosnoff says. "Sooner or later Berkshire must succumb to an asset value discount."

Berkshire shares have a forward price-earnings ratio of 16.1. That compares to 17.65 for the S&P 500 index as of Friday, according to Birinyi Associates.

In other Berkshire-related news, after Google announced its reorganization into a conglomerate named Alphabet last week, Google executives and some outsiders likened the new company's structure to Berkshire.

But that's not an apt comparison, says New York magazine writer Annie Lowrey. "There are real limits to the Berkshire analogy," she writes.

"Warren Buffett’s conglomerate is a true conglomerate, with a big insurance business, a big railroad business, a big airplane-parts business, a big underwear business, and a big candy business." Lagging performance in one unit can often be cancelled out by strong performance in another.

But, "Alphabet is really Google plus businesses that Google subsidizes or provides the capital to invest in—including some 'moonshots,' in Silicon Valley parlance—that will either turn into giant, world-changing businesses or never make a dime," Lowrey explains.

That's a far cry from Berkshire's balanced diversification.

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With several of Berkshire Hathaway's biggest public-stock holdings now sucking wind, Martin Sosnoff, CEO of money manager Atalanta Sosnoff Capital, offers a bold critique of legendary investor Berkshire's CEO Warren Buffett.
Sosnoff, Buffett, stock, picking
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2015-03-19
Wednesday, 19 August 2015 06:03 AM
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