This morning Barron column by Andre Bary at page MW-5 has a piece about the delining Dow, the relatively poor performance of Bershire H "Buffett Beauties" to wit Amer Express (-13.7% for 1998 to Sep 4), Coca Cola (-7.1%, Disney (-14.8%, Fredie mac (+0.6%0, Gillette (-19.3%) and Wells Fargo & Co (-11.6%)--Bary compares this poor performance with Berkshire's own gain of 30% ;since I keep the exact percentages on my Yahoo portfolio boards, BRK.A is +30.72%, BRK.B is +29.30%. Since most readers of Barrons treat BRK erroneously (as TMF Ralegh has frequently pointed out) as the equal of a closed-end investment company (see Barrons, page MW87-88), I expect those who trade stocks will see this divergence negatively. A second factor is that within the full-priced brokerage community (as I am aware from anecdotal evidence), the number of full priced brokers who have their clients invested in General Re outnumber by 10-1 the ones with clients who have ever owned Berkshire; anecdotal evidence says this group mostly does not want to stick around for the merger, but will sell their General Re shares as fast as they can, particularly after reading the Andrew Bary piece.My thesis is that between now and September 16/18, this (The Andrew Bary piece, plus the unease the full price brokers who own General Re feel towards Berkshire)will create a major buying opportunity in 3 traded securites: BRK.A, BRK.B and GRN.I happen to have in the past 3 months reduced my holdings of these 3 securities from what they were when the merger was announced. I need only re-deploy some capital to take advantage of what I think will be a retreat of BRK.A below the $60,000 price of September 4.By Annual Meeting time in May, 1999, I figure that the market value of BRK.A will be well north of $60,000--for the intrinsic value reasons which TMF Ralegh has demonstrated, plus a few other reasons. Some of those reasons include: (a) The intrinsic value of BRK's holdings in American Express, Coca Cola, Walt Disney, Freddie mac, Gillette and Wells Fargo--on December 31, 1998 (and May 1, 1999) will be greater than their intrinsic value on December 31, 1998 by some % number greater than 6; (b) as to this segment of Berkshire, the leverage afforded by the insurance company "float" is sufficient to raise any investment return by a factor of 2--that is, a 6% gain traslates into a 12% gain, 7% into 14%, and so forth; (c) We have some anecdotal evidence for the proposition that BRK has probably added to its previously reported holdings of (i) Wal Mart, (ii) Gap, Inc., symbol GPS--for some reason, WEB thought it a good idea to liquidate about $12 billion of zero-coupon bonds in the April-June Quarter (see the 10-Q report), and that was not done to raise cash for acquitions, since Executive Jet Aviation was acquired for 50% stock, and General Re is being acquired for 100% stock. The U S zero coupons have done nothing but go up some more, so why did WEB sell them if it was not to raise a lot of cash to buy some equities? (d)Since we know BRK owns some Wal Mart and some GPS, it is possible that he used the $12 billion to purchase in the market up to 4.99% of the outstanding shares of each company (federal law requires a 13-d or 13-g report with the SEC when an entity obtains 5% or more of the voting stock of an SEC registrant, and I have seen no such report filed on EDGAR). Here are the year to date results for Wal Mart and Gap, Inc: as of September 4, 1998, Wal mart at 58+1/2 is has a gain of 50.0% (plus dividends) over Dec 31, 97; as of Sep 4, Gap Inc. at 53+1/2 has a gain of 52.86%. Both Gap, Inc. and Wal Mart were much higher recently--Walm Mart was at 78 in mid August before the "market correction." (e) McDonalds (MCD)is another significant BRK investee who shares have gained in market price in a major way in 1998. But if you read only Andrew Bary, you do not know about the gains in WMT, GPS and MCD. Anyway--some food for thought. At the Special Meeting on September 16th there is going to be a media circus--will WEB say anything in Omaha on September 16 about recent moves. He did make a special announcement about the silver purchase. I assume WEB will attend the General Re meeting on September 18--will he say anything then? I figure the window of opportunity lies between the open of trading on September 8, and when the CNBC cameras begin to cover the special meeting on September 16.Regards, Bernard
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