Buffett Sell Signal
Call it revenge of the rumor mongers: So far this year, Warren Buffett has been wrongly named as an acquirer seven times. In five of those instances, the stocks are now lower, with all but one down considerably.
Last week, we noted how unlikely it was (Buffett to Buy Bear? Bull$%*#) that Buffett would be an acquirer or even a major investor in Bear Stearns (BSC).
False rumors are no basis for an investing strategy -- but this pattern, according to Bloomberg's David Wilson, suggests that Bear Stearns has more downside to come:
"Speculation that Warren Buffett would come to the aid of Bear Stearns Cos., the fifth-largest U.S. securities firm, may be a signal to sell its shares.
Bear Stearns is the seventh company named as a potential target for an investment or acquisition by Buffett's Berkshire Hathaway Inc. this year, Bloomberg News reports show. There's no evidence so far that the billionaire investor followed through on any of the others, and the reticence allowed him to avoid losses.
Five of the companies -- USG Corp., New York Times Co., Zurich Financial Services AG, Hovnanian Enterprises Inc. and Countrywide Financial Corp., in that order -- trade at lower prices now than they were when the speculation surfaced . . ."
These rumored companies have fallen from 7.2% to down 41%:
| Company | Performance since Buffett Rumor |
| Zurich Financial Services | -2.5% |
| Countrywide Financial | -13% |
| New York Times | -26% |
| USG Corp. | -35% |
| Hovnanian Enterprises Inc. | -41% |
Wilson adds: "As the fourth quarter unfolds, Bear Stearns shares may be fated to fall."
Indeed . . .
>
>
Source:
Buffett Sell Signal, Trading-Only ETF, Starbucks Call
David Wilson
Bloomberg, Sept. 28 2007
http://www.bloomberg.com/apps/news?pid=20601039&sid=aLktOvGugNN0&
Monday, October 01, 2007 | 07:00 AM | Permalink
| Comments (17)
| TrackBack (0)
add to de.li.cious | 
digg this! | 
add to technorati | 
email this post
TrackBack
TrackBack URL for this entry:
https://www.typepad.com/services/trackback/6a00d8341c52a953ef00e54f0225568834
Listed below are links to weblogs that reference Buffett Sell Signal:
Comments
As if the news gets better… UBS just announced that it expects to post a third quarter loss of up to $690 million.
The only caveat about BSC is that the bad news is already priced in. Contrary to Lehman Brothers (LEH) and Goldman Sachs (GS) where the bad news hasn't really hit yet, Bear Stearns (BSC) was the first to take substantial write-downs on their books. The question is will being first to recognize the losses help or hurt them in the future?
We honestly don't know the answer as it all depends how 'kosher' the rest of the books are at BSC and competitors. We reprinted an excellent article by Jonathan Weil (Bloomberg) under the title "Make Believe Numbers by the Numbers". Weil talks about fudging the numbers at Wells Fargo (WFC), however in principle the same could be going on elsewhere.
Disclosure: No conflicts.
Posted by: CrossProfit | Oct 1, 2007 7:43:23 AM
The comments to this entry are closed.
