Buffett's Berkshire Feels the Bear's Bite

Posted By:Alex Crippen
Topics:Warren Buffett
Companies:American Express Co | US Bancorp | Wells Fargo and Co | Berkshire Hathaway Inc.

Shares of Warren Buffett's Berkshire Hathaway are down almost 20 percent from their all-time closing high of last December.

Wall Street's generally accepted definition of a 'bear market' involves a 20 percent drop from a recent high.

Yesterday, Berkshire shares dipped into bear territory on an intraday basis, before recovering to close at $120,100 .. a 19.5 percent drop from its all-time closing high of $149,200, set on December 10.

That's the lowest close for Berkshire since October 4.

Current Berkshire price: Berkshire Hathaway IncUS%3bBRK.A
118665.0 -1435.00 -1.19% NYSE


Quote | Chart | News | Profile
[US;BRK.A 118665.0 -1435.00 (-1.19%) ]




Bloomberg points out that Berkshire shares fell 14.7 percent during the first six months of the year, its worst first half in 18 years. It blames lower revenues for Berkshire's insurance companies and weakness for several stocks in Buffett's stock portfolio, including Wells Fargo WELLS FARGO & CO NEWWFC
23.59 -0.53 -2.2% NYSE


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[WFC 23.59 -0.53 (-2.2%) ], American Express AMERICAN EXPRESS COAXP
39.62 -0.40 -1% NYSE


Quote | Chart | News | Profile
[AXP 39.62 -0.40 (-1%) ], and U.S. Bancorp US BANCORP NEWUSB
28.10 -0.30 -1.06% NYSE


Quote | Chart | News | Profile
[USB 28.10 -0.30 (-1.06%) ]. (The stock market's overall weakness during the first half of the year hasn't helped either.)

Buffett himself has said he doesn't get upset when a stock he's buying goes down in price, just as he doesn't get upset when he buys a hamburger one day and it's cheaper the next. Just an opportunity to pick up a bargain.

So, is Berkshire a bargain?


Related Warren Buffett Watch Posts
Kass Shorts Berkshire Hathaway Again, Citing "Bombs in Buffett's Book" (June 4)
Berkshire Hathaway at 12-Week High After 11% Rally Over 10 Sessions (May 30)
Short Seller Tells CNBC Why Warren Buffett Has Met His "Watergate" (May 19)

Bloomberg quotes Charles Hamilton of FTN Midwest Securities as saying it is "close to getting more fairly priced. I wouldn't say it presents a buying opportunity right now."

Frank Betz at Carret Zane Capital Management disagrees. "I'd put a new client in Berkshire right biw. It's probably the highest-quality collection of individual companies that's ever been assembled. Long slides are not in the Berkshire Hathaway lexicon."

And faithful Buffett bull Whitney Tilson sees Berkshire's "intrinsic value" around $157,000 a share .. and he argues that the shares reached that intrinsic value in 11 of the past 12 years. "I sleep well. It's not going to double overnight, but we we think it will in five years ... It's the stock you want to own," he tells Bloomberg. Especially if Buffett uses the current market weakness to find some solid bargains of his own.

Wednesday, 4 Jun 2008
Kass Shorts Berkshire Hathaway Again, Citing "Bombs in Buffett's Book"Posted By:Alex Crippen
Topics:Warren Buffett
Companies:American Express Co | Kraft Foods Inc. | Wells Fargo and Co | Coca Cola Co | Berkshire Hathaway Inc.

Short seller Doug Kass, as seen on TheStreet.com
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Short seller Doug Kass renewed his attack on Berkshire Hathaway, placing another bet against the stock by going short again yesterday and writing critically today about "some bombs in Buffett's book."

(For more on why Kass is negative on Berkshire, including a video clip, see the recent WBW post Short Seller Tells CNBC Why Warren Buffett Has Met His "Watergate.")

In a blog post on TheStreet.com today, Kass points to the "poor short-term and long-term charts of Berkshire's four largest equity investments."

They are:

Coca-Cola COCA COLA COKO
51.37 0.37 +0.73% NYSE


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[KO 51.37 0.37 (+0.73%) ]


Wells Fargo WELLS FARGO & CO NEWWFC
23.59 -0.53 -2.2% NYSE


Quote | Chart | News | Profile
[WFC 23.59 -0.53 (-2.2%) ]


Kraft KRAFT FOODS INCKFT
28.72 0.32 +1.13% NYSE


Quote | Chart | News | Profile
[KFT 28.72 0.32 (+1.13%) ]


American Express AMERICAN EXPRESS COAXP
39.62 -0.40 -1% NYSE


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[AXP 39.62 -0.40 (-1%) ]
Kass argues that the four Buffett biggies "continue to suffer" even as Berkshire shares advanced over the past two weeks. (Berkshire closed at a 12-week high last Friday, following an 11 percent rally over ten sessions.)


Kass' Four Buffett "Bombs"
May 20 Close June 3 Close Pct. Change
Coca-Cola 57.09 56.40 -1.2%
Wells Fargo 28.05 26.78 -4.5%
Kraft Foods 32.56 32.05 -1.6%
American Express 47.31 44.31 -6.3%
Berkshire Hathaway 123,300.00 134,000.00 +8.7%


And Kass is not just talking about the short-term. He writes, "Holding these four stocks 'forever' has not been value-additive to Berkshire over the last decade" although it has been a "particular drain" more recently.


His admittedly exaggerated characterization: "Warren Buffett, who has achieved a remarkable investment record over 50 years, has begun to morph from the 'Shakespeare of investing' into the 'Mozart of marketing.'"




Buffett: Recession Is Here For People on Main Street
28 april 2008
The US economy indeed has entered into a recession, even if the traditional indicators aren't showing it yet, billionaire investment guru Warren Buffett said.


Gerald Herbert / AP
Warren Buffett
--------------------------------------------------------------------------------


Economists generally pronounce a recession for an economy that has shown two consecutive quarters of negative growth in gross domestic product, but Buffett said on CNBC Monday that you can throw that model out.

"I think it's defined by the man in the street a little differently than whether there's been two quarters of reported (negative) GDP growth," the Berkshire Hathaway Chairman said. "We're in a recession, unless you want to stick strictly to the technical definition, which I think really doesn't have much meaning to the fellow who has lost his job or is facing a money market fund that isn't paying him out or whatever it may be."

He also said the recession could be more painful than some think.

"This is not a field of specialty for me, but my general feeling is that the recession will be longer and deeper than most people think," Buffett said. "This will not be short and shallow.

"I think consumers are feeling gas and food prices, and not feeling they've got a lot of money for other things."

At the same time, he praised the Federal Reserve for its role in trying to keep the economy afloat as it faces myriad pressures from the credit crunch and skyrocketing fuel costs.



In particular, he said the central bank acted properly in its rule during the controversial bailout of investment bank Bear Stearns Basic Earth Science Systems IncBSC
1.32 -0.14 -9.59% Berlin Stock Exchange


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[BSC 1.32 -0.14 (-9.59%) ]. The Fed helped broker a deal between Bear and JPMorgan Chase JPMORGAN CHASE & COJPM
34.60 0.58 +1.7% NYSE


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[JPM 34.60 0.58 (+1.7%) ] that allowed Bear to avoid insolvency.

"I think that what the Fed did ... with Bear Stearns was a big line in the sand," Buffett said. "At that point, the world started looking different in the financial world."

Buffett: Recession may be worse than feared
(Agencies)
Updated: 2008-04-29 09:20


NEW YORK -- Warren Buffett, the world's richest person, said on Monday the US economy is in a recession that will be more severe than most people expect.

Buffett made his comments on CNBC television after his Berkshire Hathaway Inc (BRKa.N) (BRKb.N) agreed to invest $6.5 billion in the takeover of chewing gum maker Wm Wrigley Jr Co (WWY.N) by Mars Inc in a $23 billion transaction.

"This is not a field of specialty for me, but my general feeling is that the recession will be longer and deeper than most people think," Buffett said. "This will not be short and shallow.


Warren Buffett, chairman and CEO of Berkshire Hathaway, on Capitol Hill in Washington, November 14, 2007. [Agencies]


"I think consumers are feeling gas and food prices," he added, "and not feeling they've got a lot of money for other things."

He was not immediately available for further comment. Known for his frugality, the 77-year-old Buffett has lived in the same 10-room Omaha, Nebraska, house for a half-century, despite being worth an estimated $62 billion.

On Wednesday, the US Commerce Department is expected to say how fast the economy grew in the first quarter. Economists on average have projected that gross domestic product grew at an annualized 0.2 percent rate in the quarter.

Two quarters of declining GDP is a traditional indicator of recession. That last happened in 2001. Economists expect the US Federal Reserve on Wednesday to cut a key lending rate for a seventh time beginning last September.

Berkshire is a $197 billion conglomerate best known for its insurance holdings, such as auto insurer Geico Corp, but it owns more than 70 businesses.

Many of those businesses are tied to the housing market, including Acme Brick Co, insulation maker Johns Manville, and the real estate brokerage HomeServices of America Inc.

Others depend on consumers to spend more on discretionary items, such as Ben Bridge Jeweler and Borsheims Fine Jewelry.

"In the retail businesses ... if anything, they've gotten a little worse," Buffett said. "Of course, things connected with housing, whether it's in brick or whether it's in carpet, those businesses have shown no uptick at all. Jewelry had a bad Christmas ... and it stayed that way."

Buffett sees no respite from the housing slump.

"I think this is going to be fairly long and fairly deep, but who knows," he said.

In March, Forbes magazine pegged Buffett's net worth at $62 billion, ahead of Mexican tycoon Carlos Slim's $60 billion and Microsoft Corp (MSFT.O) Chairman Bill Gates's $58 billion. Gates is a friend of Buffett and a Berkshire director.