NEW YORK (TheStreet) -- Doug Kass of Seabreeze Partners is known for his accurate stock market calls and keen insights into the economy, which he shares with RealMoney Pro readers in his daily trading diary.Among his posts this past week were entries about Berkshire Hathaway ( BRK.A) ( BRK.B) and Green Mountain Coffee Roasters ( GMCR). Please click here for information about subscribing to RealMoney Pro.
Warren Buffett's Tax-Efficient Enterprise
Originally published on Thursday, May 9 at 11:33 a.m. EDT. There are many issues to raise regarding Berkshire's structure, strategy and valuation -- taking profits on stocks, however, is not one of them. Here is a follow-up link to Paul Price's view that Warren Buffett should have sold Berkshire Hathaway's Coca-Cola ( KO) and Washington Post ( WPO) shares. After I wrote my response, I thought perhaps that I was too hard on Paul, but the message remains the same.
Warren runs a tax-efficient enterprise -- his buys in Coca-Cola and Washington Post are testimony. It is my view that there are many other different issues to raise regarding Berkshire's structure, strategy and valuation. At the time of original publication, Kass was short BRK.B.
Memo to Paul 'The' Price 'Is Right'
Originally published on Thursday, May 9 at 10:40 a.m. EDT. Washington Post and Coca-Cola are forever positions for Warren Buffett and Berkshire Hathaway. Your observations that Warren Buffett should have sold his Washington Post and Coca-Cola positions because of the drop in the share prices ignores a number of critical issues, including that these are "forever" positions for Berkshire Hathaway and that these are sizable, illiquid core investments for Warren.
In 2001, Coca-Cola faced significant leadership issues as well as a lot of controversy regarding the product itself (rumors of contamination, etc.). He was prepared and did look beyond those circumstances. I am not sure that I understand your point, as the shares have gone on to hit an all-time high. In the case of Washington Post, this is a forever position -- he is not interested in where the shares trade over a 10-year period, or, for that matter, over a 20-year period. My suggestion is to read Alice Schroeder's excellent book, The Snowball: Warren Buffett and the Business of Life, to learn more about his investing philosophy and why Coca-Cola and Washington Post are not for sale at any price.
GMCR Brew Up a Nice Quarter
Originally published on Thursday, May 9 at 10:13 a.m. EDT. The bottom-line beat was entirely on the gross-margin line, as improved productivity and lower coffee costs benefited the company. Green Mountain Coffee Roasters had a nice beat to EPS expectations at $0.93 compared to forecasts of $0.72. The beat was entirely on the gross-margin line, with a gain of nearly 600 basis points, as improved productivity and lower coffee costs benefited the company. Free cash flow generation was strong.
Sales growth was disappointing, however. Penetration and attachment rates worsened. K-cup sales growth decelerated and was under forecasts. The Starbucks ( SBUX) agreement was extended, though likely with lesser economics. With shares ripping, Green Mountain insiders who sold have been mistaken over the near term, and I will be tearing up my put ticket. At the time of original publication, Kass was long GMCR puts.