Doug Kass Changes His Tune On Berkshire Hathaway (BRK.A); Starts Buying

April 9, 2009 12:00 PM EDT

Doug Kass, who has long been bearish on Berkshire Hathaway (NYSE: BRK.A), decided to change his viewpoint and went long Berkshire today.

Kass noted that last night Moody's removed Berkshire Hathaway's Triple-A rating. Doug said, "This move, following Fitch's downgrade last month, is almost laughable in its timing.
The irony is that the Moody's downgrade has coincided with:
1. a substantial improvement in the value of Berkshire's investment portfolio; and
2. a reversal in some of the losses from Buffett's foray into shorting puts on the major world indices."

Doug Kass began shorting shares of Berkshire Hathaway when it was trading around $145,000 and he noted some of the conditions have changed since his short, therefore, today Kass began accumulating a long position in Berkshire.

Kass's current estimate of Berkshire's investment portfolio value is now around $73,000 a share, so he's paying less than 3.5 times after-tax operating earnings for the non-investment assets of Berkshire Hathaway. Additionally, Kass said the intrinsic value of BRK.A stands at about $115,000 a share, or nearly 30% higher than its share price.

Kass expects the world's stock markets to rise and said Berkshire's investment portfolio and its intrinsic "value will likely be much higher by midyear."

One interesting factoid: The $3 rise in Wells Fargo's (NYSE: WFC) today equates to more than a $1 billion increase in value in Berkshire's investment portfolio.

Wells Fargo & Company (Wells Fargo) is a financial holding company and a bank holding company.

Related Categories

Insiders' Blog
Trader Talk

Stocks Mentioned

Related Entities

• Warren Buffett
• UBS
• Doug Kass

Add Your Comment

Name

Subject

Body

Verification can't see the text?
click here to refresh the image.
what's this?