Whitney Tilson’s Case For Berkshire $$

• ToddSullivan
• February 5th, 2010

Whitney makes a strong case for Berkshire shares being undervalued…

I just can’t make up my mind on Berkshire. In one sense it owns many businesses that will do fine as the economy recovers. In the other, many of its large equity holdings WFC, USB, KO are in my view dead money for years. The argument isn’t whether the near $20B in KO and WFC is going to be a drag on Berkshire earnings, but what better use could that money go towards.

On the other hand, Buffett’s investment over the past year have turned out to be near prophetic although I do believe the BNI deal was over priced.

I do discount the “Buffett’s age” argument. Whether he is there or not matters little on the performance of Berkshire’s operating businesses which are the majority of its earnings. If his replacement is indeed David Sokol, then Berkshire is in very capable hands when he steps down. This isn’t to say the day he steps down there may not be an huge selloff, just to say the longer term performance of its various buisnesses will not be affected.

Yes, I also know S&P downgraded it yesterday but let’s be honest, does anyone really put any faith in the ratings agencies anymore? Really? Not me… For the record the only one I believe worth a damn is Sean Egan’s firm and no, I have no affiliation with them at all.

I guess if I cannot make up my mind it is because shares just aren’t cheap enough, right? The cheaper the shares, the weight your various concerns carry diminishes as they will effect the ultimate outcome by a smaller margin should they come to pass.

That would mean that for me Berkshire is a good investment, just a bit cheaper..

Here is Whitney’s presentation.

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