Investing

Kass: Spitting Out the Wrigley News

04/28/08 - 11:59 AM EDT


These blog posts originally appeared on RealMoney Silver on April 28.


Grantham Digs Deeper

7:23 a.m EDT

There are a number of modern day investors that I truly admire (all for different reasons):

  • Berkshire Hathaway's BRK.A Warren Buffett for his patience, logic of argument and sense of a "margin of safety";
  • Soros Fund Management's George Soros for his ability to aggressively press an investment thesis;
  • Capital Growth Management's Ken Heebner for his capacity to isolate (and concentrate in) today's and tomorrow's market leaders;
  • Fidelity Magellan's Peter Lynch (retired) for his adaptive, bottom-up approach to investing;
  • Omega Advisors' Leon Cooperman for his work ethic and his thorough company knowledge (as he goes "belly to belly" with managements); and
  • SAC's Steve Cohen and Steinhardt Partners' Michael Steinhardt (retired) for their trading acumen and ability to adjust to different market cycles.

In terms of providing a (written) sense of historical perspective and in expressing and weighing the current risks/rewards in the equity and fixed income markets, however, GMO's Jeremy Grantham has no peers.

Here is Grantham's first-quarter 2008 letter to investors. It is a great read and outlines far better than I can the potential risks facing equity investors over the next few years.


What Exactly Did Buffett Buy?

9:02 a.m. EDT

The acquisition of Wrigley WWY is being funded by $11 billion from Mars, a $5.7 billion senior debt facility from Goldman Sachs GS and from $4.4 billion of subordinated debt from Berkshire Hathaway.

Berkshire has not apparently received equity in the entire Wrigley entity but rather will be purchasing a minority equity interest (for $2.1 billion) in a Wrigley subsidiary at a discount to the share price being paid to the shareholders of Wrigley.

With all the questions being bombarded on Buffett on CNBC just now, I would have liked a commentator to ask which subsidiary and why he didn't take a position in the entire company.

I would also add that the Wrigley deal supports some of my bearish rationale for being short Berkshire Hathaway, in that Buffett's ability to buy the type of world-class consumer franchise that has been his trademark (and at a reasonable price) has diminished based on the size of the Wrigley premium.

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At the time of publication, Kass and/or his funds were short Berkshire Hathaway, Colgate-Palmolive, Kellogg, General Mills and Kraft, although holdings can change at any time.

Doug Kass is founder and president of Seabreeze Partners Management, Inc., and the general partner and investment manager of Seabreeze Partners Short LP and Seabreeze Partners Short Offshore Fund, Ltd.


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