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This blog post originally appeared on RealMoney Silver on March 31 at 7:15 a.m. EDT.
David Sokol situation at
Berkshire Hathaway(BRK.A - Get Report)/
(BRK.B - Get Report) is not quite "a tempest in a teapot," the large after-hours drop to $83 a share more than discounts the economic consequence to the company, which is likely to be minor.
Let me make it clear that the timing of Sokol's purchase of
Lubrizol(LZ) stock is disturbing, as the calendar of facts surrounding the situation may be inconsistent with the law. Moreover, it certainly is inconsistent with the ethics and investment principles for which Warren Buffett has stood over the decades.
I am in general agreement with Whitney Tilson's comments,
expressed last night on "Fast Money," that Sokol is a loss to Berkshire but there are several equally qualified replacements for the Oracle. Moreover, I have long thought that Sokol's frequent requests to retire from the company suggested it was unlikely that he was going to replace Buffett.
That said, Mr. Buffett is not going anywhere for now.
Last night, I purchased Berkshire B shares at around $83, down $2.50 from the
NYSE close after the news hit, as Berkshire's current share price relative to intrinsic value has widened and now represents an attractive entry point.
My purchase was emboldened by the report on "Fast Money" that Sokol would be appearing on "Squawk Box" this morning, as a more thorough explanation of his stock purchases could ameliorate some short-term concerns and lift the cloud currently hanging over Berkshire's shares.
Finally, if I were a commentator on "Squawk," I would have asked the following questions of Sokol this morning:
What are Berkshire's internal corporate guidelines for buying and selling stock? Does employee investment activity have to be reported? If so, when? Who within Berkshire signs off on purchases/sales? And does Buffett see the stock activity of employees and Board members?
Why did he buy and quickly sell his original stake in Lubrizol?
Why did he repurchase a much more sizeable position in Lubrizol approximately a month later?
With regards to the second purchase, how did the size of his purchase compare to his average portfolio holding?
What motivated his decision to repurchase a much large stake in Lubrizol the second time in January? Explain the timing of both purchases.
Is he an active or inactive investor?
It has been reported that he intended to resign from Berkshire over the last two years. What was his present status with regard to staying/leaving?
Was he currently aware of who Buffett would propose as his replacement? Was he in contention?
Doug Kass writes daily for RealMoney Silver
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