Doug Kass of Seabreeze Partners Management just released a note announcing that he sold his long position in Berkshire Hathaway (BRKA) on Monday. Kass clearly respects the company and its leader: “I worship at the altar of Warren Buffett,” he announces. But the company doesn’t have the same growth opportunities that it had 20 years ago, or even five years ago. It’s harder to squeeze big gains out of its massive portfolio, and Buffett will increasingly be delegatibng responsibilities to his likely successors, Todd Combs and Ted Weschler.
“Berkshire�s past growth and successes are one of its greatest enemies to future growth. Ever-larger investments/acquisitions are required to produce an impact and provide differentiated returns for shareholders,” Kass writes. “At the time of Buffett�s acquisition of Berkshire Hathaway in 1965, the company�s market value was under $20 million; it stands today closer to $190 billion. Yesterday�s $10 billion investment in IBM (IBM) is, to this observer, a reflection that larger deals are needed to move the needle and that more ordinary and plain vanilla investments will be the feature of Berkshire’s portfolio strategy in the future. Vice Chairman Charles Munger has previously talked about the inevitability of less-than-special investments for the past two years or so.”
In addition, Weschler and Combs don’t have the star power or the investing acumen that Buffett does. How could they?
“Will they do as well as Buffett? Probably not, as they are mere mortals, and with the benefit of hindsight and history, Buffett was a true investing immortal! What is almost certain is that Buffett�s old black magic will not be easily duplicated by his appointees.”
Kass now thinks Berkshire’s intrinsic value is about $135,000. The class A shares are trading this morning around at $113,200 down 0.6%.
“I would be a buyer of Berkshire at around $100,000 a share, but, for now, I see better opportunities elsewhere.
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