Kass: Spitting Out the Wrigley News

04/28/08 - 11:59 AM EDT

Doug Kass


Spoiling the Bullish Nondurables Thesis

9:24 a.m. EDT

Jim "El Capitan" Cramer concludes that, based on Buffett's Wrigley involvement and his comments on CNBC, consumer nondurables are cheap.

I couldn't disagree more.

I am short Colgate-Palmolive (CL Quote - Cramer on CL - Stock Picks), Kellogg (K Quote - Cramer on K - Stock Picks), General Mills (GIS Quote - Cramer on GIS - Stock Picks) and Kraft (KFT Quote - Cramer on KFT - Stock Picks) -- stocks that are trading between 17 times and 24 times earnings, with between 7% and 10% secular growth rates.

PEG (price-to-earnings-growth) rates of 2 times have no interest for me, especially in the face of the commodity headwinds these companies now face and will likely face for years ahead.


Buffett's Trick Gum Marketing Scheme

11:27 a.m. EDT

Buffett demonstrated his brilliance this morning in the Wrigley deal, not as an investor necessarily but as a marketer.

Why do I write this?

I believe his $4.4 billion of subordinated debt to Mars used to finance a portion of the Wrigley purchase was a sideshow.

The real brilliance is how Buffett has marketed himself and Berkshire Hathaway as the safe "go-to guys" without an agenda.

As a result, Buffett got a sweetheart deal and was able to invest an additional $2.1 billion at a discount to the share price paid to other Wrigley shareholders in the tender.

Here is the precise wording of the press release:

Funding for the transaction includes about $11 billion from Mars, a $5.7 billion committed senior debt facility from Goldman Sachs, and $4.4 billion of subordinated debt from Berkshire Hathaway Inc. At closing, Berkshire Hathaway has committed to purchase a minority equity interest for $2.1 billion in a Wrigley Co. subsidiary at a discount to the share price being paid to the stockholders of Wrigley.


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

1 2
Next Page »
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.

Your Recent Quotes: Quote Up0 | Quote Down0
Dow S&P 500 NASDAQ
Oil*
Gold
10 Yr
0.00%
%
%
%
Data delayed 20 min
Sign up for our FREE newsletters now. See All

  • Cramer's Daily Booyah!
  • Before the Bell

Premium Stock Ideas
Premium Services