Doug “Right as Rain” Kass is now waaay bullish on Berkshire Hathaway, despite Warren Buffet’s investing “style drift”.
Doug Kass writes:
After the close of trading, Moody’s (MCO Quote) stripped away Berkshire Hathaway’s (BRK.A Quote) Triple-A rating. This move, following Fitch’s downgrade last month, is almost laughable in its timing. But, if nothing else, investors have become inured to untimely moves by the ratings agencies.
As to the effect on Berkshire Hathaway’s balance sheet and income statement, it is negligible. Gross debt expenses will only rise slightly — thanks to the company’s still large cash hoard and given the fact that Berkshire is overcapitalized (both absolutely and vis-à-vis other insurance companies). Importantly, Berkshire has structured its derivative contracts ingenuously in the fact that it did not have to provide additional collateral when the major world stock market indices dropped precipitously; it simply recorded non-cash charges.
The irony is that the Moody’s downgrade has coincided with:
1. a substantial improvement in the value of Berkshire’s investment portfolio; and
2. a reversal in some of the losses from Buffett’s foray into shorting puts on the major world indices.
OUR COMMENT: If Buffet would just split the stock (1000-1), he could attract a whole new investor class at $92 a share vs. the current $92,000. This would drive the stock higher, and create more liquidity. Not splitting the stock is asinine.