11 Reasons to Short Berkshire Hathaway

[DanielGMask]

Doug Kass loved to put these shorts out on BRK when it was a little pricey - always got the headlines and
scalped a few bucks here and there.  Even got him an invitation to be the featured short bear at the
Berkshire meeting on the panel with Becky Quick, etc - where he shamelessly promoted himself in front of 40,000 attendees.

He didn’t get invited back after that. I sense that Greg Warren of Morningstar is on the Dias as somewhat of a bear(I feel that way about him). He gets into a lot of detail with his six allotted questions but imo ends up in the “precisely wrong “ category. I am also looking for someone who can ask the tough longer term questions that will get Buffett talking about things he would rather not.

The format of the q&a during the AM makes it impossible to get direct responses. A complex question usually needs follow up questions, more so when the person answering is capable of directing attention to what he wants to teach. Because of this format people pack their questions with lots of information and WEB usually gives vague responses.

[DanielGMask]

OK, that article is dated March 10, 2008. With the benefit of hindsight I'd say that it did not age well. It also doesn't make sense. In my opinion the article doesn't even make a case to short BRK. A reason not to own it, maybe, but not a short. The only bit that actually carried some weight was valuation. In March 2008 BRK was trading at 1.75 book. That was definitely pricey and in my view overvalued somewhere in the range of 15-25%. But then in March 2008 pretty much everything was overvalued.

Those that were worried about growth back then consider this. In the 10 years that followed Berkshire grew itself by 150%. Assets in q1 2008 were 281 Bn. In q1 2018 they were 703 Bn. And they did that in a very conservative way. That's impressive! Even more impressive was GEICO. Q1 2008 premiums - 3 Bn. Q1 2018 Premiums - 8 Bn 167% growth.

When it comes to Berkshire, I don't even mind if the company somewhat under-performs the S&P. When you're investing you're getting paid to take risk. In my view Berkshire's risk is below the S&P risk. If it somewhat over-performs the S&P I'm getting paid handsomely for the risk I'm taking. But then I'm probably not as greedy as some on you.

Nice historical perspective.  Thanks for doing the work.

I don’t agree with the statement BRK’s risk is below the S&P. I define risk as the possibility of loss of principal and I consider the probability of BRK going to zero much bigger than the S&P. Having said that, I don’t have any investment in the index and more than 50% of my portfolio in BRK.

Shorting is risky business and shorting something as profitable and solid as BRK more so. The right question is not if this is the right time to short Berkshire, I think it’s not. The appropiate question is if BRK may suffer as a company once WEB is no longer at the helm or alive, and that probably is going to happen during the next 10 years.

BRK is less attractive because is huge and compounding at this size is not that easy, but those who are familiar with the concept of antifragility will conclude that this is as antifragile as a public company may get!

[rb]

I don't think that BRK will get less profitable after WB passes. It may even get more profitable as the smaller subs get whipped up into shape. I think that the smaller subs carry some sentimental value for VB and he cuts them a lot a slack. That won't be the case with the new management. The new management will also probably be more aggressive and more open to 3G type deals. On the flip side, without WB there will probably be less BAC type special deals and/or the terms will not be as usurious.

On the investment side T&T seem quite capable. They were into Apple way before WB started blasting it with his elephant gun and Precision Castparts was a T&T deal.

I agree that their size will make it more difficult for them to grow. But they somehow managed it the past. See the past 10 years. If they do reach that point where it gets too hard they'll start to return some capital. So what? That's far from the worst things.

[clutch]

In light of this topic (and a sell-off today), I bought more BRK.b.

[John Hjorth]

I don't think that BRK will get less profitable after WB passes. It may even get more profitable as the smaller subs get whipped up into shape. I think that the smaller subs carry some sentimental value for VB and he cuts them a lot a slack. That won't be the case with the new management. The new management will also probably be more aggressive and more open to 3G type deals. ...

From Mr. Mungers "special Past, Present & Future" Letter, p. 42, lower part :

... But, under this Buffett-soon-leaves assumption, his successors would not be “of only moderate ability.” For instance, Ajit Jain and Greg Abel are proven performers who would probably be under-described as “world-class.”  “World-leading” would be the description I would choose. In some important ways, each is a better business executive than Buffett.

And I believe neither Jain nor Abel would (1) leave Berkshire, no matter what someone else offered or (2) desire much change in the Berkshire system. ...

-A bit striking that Mr. Munger cherry picked exactly those two particular Berkshire sub CEOs in his letter now almost four years ago, right? [ ; - ) ]

[5xEBITDA]

the article doesn't even make a case to short BRK. A reason not to own it, maybe, but not a short.

Most people think these are the same thing.