Investing Opinion

Return to Article

Kass: Some Bombs in Buffett's Book

Doug Kass

Warren Buffett's largest legacy investments continue to suffer, even as the shares of Berkshire Hathaway (BRK.A) have climbed over the past two weeks.

Consider the poor short-term and long-term charts of Berkshire's four largest equity investments (number of shares, percentage ownership and year-end dollar value follow ticker):

• Coca-Cola (KO) -- 200 million shares, 8.6% of total outstanding shares and $12.3 billion;
• Wells Fargo (WFC) -- 303 million shares, 9.2% of outstanding shares and $9.2 billion;
• Kraft (KFC) -- 124 million shares, 8.1% of outstanding shares and $8.1 billion; and
• American Express (AXP) -- 151 million shares, 13.1% of outstanding shares and $7.9 billion.

Holding these four stocks "forever" has not been value-additive to Berkshire over the last decade; it's been a particular drain over the short term. Indeed, lugging these sizeable investments has resulted in lost opportunities. Moreover, to paraphrase the Master, "Where are the future moats at Coca-Cola, Wells Fargo, Kraft and American Express?"

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" -- of course, I am using exaggeration to make my point! -- as the law of large numbers has begun to disadvantage Berkshire. The company's asset and earnings bases are simply too large for the business to make outsized gains in the future.

I shorted more Berkshire Hathaway yesterday.

Doug Kass is the author of The Edge, a blog on RealMoney Silver that features real-time shorting opportunities on the market.