Saturday, April 11, 2009

Tortoise VS Hare: Tortoise wins again

Long VS short, there just aint no contest!

Yeah, I know, I know, he is going to bang on again about the merits of long term investing over short term.

Absolutely, it is a good subject and important if you want to make money well into the future. Invest in a good business, it will have its highs and lows performance wise regardless of its share price and the odds are better than a short term punt that you will be happier in the end.

I am motivated to write this column because of my sustained interest in Warren Buffett and his investment style; buy a great company for a good price and never sell it.

Recent developments for Buffett have seen his Berkshire Hathaway company lose money, lose share price and Berkshire losing its high credit rating a few days ago.

That has seen his critics lather at the mouth to come out and critique his recent moves to buy stocks and spend money rather than do the opposite I presume.

One virulent critic has been Doug Kass and he has been shorting Berkshire stock over the last year.

But surprize, surprize being the short term thinker he his today he came out and did a complete 180 degree flip flop, Doug is buying Berkshire stock for his long term draw!

This from Doug:

"When conditions change, as they appear to be doing now -- see this morning's Wells Fargo (WFC Quote) news -- opinions must change, and opportunities must be embraced. This is especially true in the case of Berkshire Hathaway as the considerations that led to my shorting of Berkshire Hathaway's shares at around $145,000 a share have now reversed, and, with the shares today trading under $90,000 a share, I have begun to accumulate a long position in Berkshire Hathaway".

Doug could have bought Berkshire at $74,100 in November and again in February 2009 at $73,677.30.

But if you looked at Buffett's move when "his" Wells Fargo bought the basket case Wachovia last year, as a long term investment, you might have had the fortitude to buy Berkshire stock thinking Well's management might know what they were actually doing.

Kass even advocated buying Wells Fargo last November, but not Berkshire Hathaway stock, which owned around a 7% stake in the company according to filings last December. Wells is now one of Americas largest banks.

Berkshire has been the owner or part-owner of many global brands and added more recently.

Kass could have had a stake in all of these cheaply for a long term recovery but only picked one.

The purchase of debt or stock in Harley Davidson, Tiffany, Goldman Sachs, General Electric and a number of other smaller and some larger purchases over the last 12 months also look to pay off as the economy inevitably recovers in the long term.

Oh how the tortoise has taught the hare a lesson, and more to come I would think.

Thanks for your indulgence of my self-indulgence once again.

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Related Amazon Reading

The Four Filters Invention of Warren Buffett and Charlie Munger
The Four Filters Invention of Warren Buffett and Charlie Munger by Bud Labitan
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c Share Investor 2009

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