Can Kass Beat Buffett and Drive Down Berkshire Stock?
Berkshire Hathaway’s (NYSE:BRKA)(NYSE:BRKB) annual shareholder meeting will kick off on Saturday morning with the second International Newspaper Tossing Challenge (which is exactly what it sounds like). A few thousand Berkshire shareholders and their guests will attend the weekend event, which punctuates the post-market Friday release of the company’s financial results.
Historically, a question-and-answer session ahead of the actual shareholder meeting has been used by journalists and analysts as an excuse to elicit words of wisdom from Berkshire’s Chairman and CEO Warren Buffett. However, apparently bored of happy talk and waxing philosophically about investment and business principles, Buffett announced in his last letter to shareholders that he would like to “spice things up” and “add to the panel a credentialed bear on Berkshire, preferably one who is short on the stock.”
Of those, there aren’t many. As of April 15, just 0.1 percent of Class A shares and 1.3 percent of Class B shares were shorted, which makes sense given the stock’s performance. Shares are up about 32 percent on the year.
But there are a few brave souls out there who are not only willing to short Berkshire stock, but are willing to publicly articulate and defend their position. Chief among them, and the man chosen by Buffett to be the credentialed bear at this year’s meeting, is Douglas Kass, founder of hedge fund Seabreeze Partners Management.
In 2008, Kass wrote an article for The Street in which he outlined 11 reasons to short Berkshire stock. Kass is open about his respect for Buffett, but also blunt about the reasons why he sees the operation weakening. One of the key pieces of his argument against the stock is the fact that one day, Buffett will no longer be at the helm. Without the Wizard of Omaha steering the ship, Kass suspects that investors will pull their money and head to other players Duquesne’s Stanley Druckenmiller, and SAC’s Steven Cohen, who have managed to outperform Berkshire.
Kass will presumably use his six questions to press on Berkshire until he finds out where it hurts. In an interview with CNBC, Buffett goaded Kass, asking him to try to drive the stock down if he could.