Buffett Challenger Kass Prepares For Meeting, Munger Test

Buffett Challenger Kass Prepares For Meeting, Munger Test

Douglas Kass, the investment manager selected by billionaire Warren Buffett to ask questions at Berkshire Hathaway Inc. (BRK/A)’s annual meeting next week, has hit the books in preparation for the challenge.

The fund manager said in an interview yesterday that he’s reading Alice Schroeder’s more-than-800-page biography of Buffett and other titles to get ready for the May 4 gathering in Omaha, Nebraska. It’s taken about 10 hours on average for each question, he said by phone.

“We can’t lose sight that this company, and Mr. Buffett as a person, has been combed over with questions,” said Kass. “It’s not like this is a breeze. I think he expects something of me, and I don’t want to disappoint him.”

Buffett, 82, has sought to refocus attention at the meeting on Berkshire by allowing journalists and analysts to alternate with the audience in asking questions of him and Vice Chairman Charles Munger. Kass, founder of Seabreeze Partners Management Inc., answered Buffett’s call to change the panel by adding an investment professional who’s betting on the stock’s decline.

“He wanted to spice up the annual meeting, and to make it more interesting from the context of the questions, as opposed to a bunch of softballs or non-Berkshire-related political questions, tax questions, policy questions,” Kass said.Kass wrote in early 2008 that Berkshire shares may fall, in part because of the possibility of declines in Buffett’s equity portfolio and the difficulty of replacing the billionaire. The article appeared inTheStreet.com on March 10, 2008, when the company’s shares closed at $131,400. They dropped below $71,000 in March 2009 amid a global economic slump.

Mae West

Berkshire’s stock has since more than doubled, closing at a record $161,000 on April 16. The rally, paired with climbing profit, should help lift the mood of shareholders at the meeting, which draws tens of thousands of people each year, said Buffett biographer Andrew Kilpatrick.

“Everywhere you point, things are good,” he said in an interview. “Cash (BRK/A) is coming in like crazy.”

In the interview yesterday, Kass declined to explain his reason for betting on Berkshire’s decline now or hint further at topics he may address at the meeting. He did say he would include quotes from people that Buffett has cited before.

“Not Ben Graham,” Kass said. “Maybe Mae West.”

Graham taught Buffett at Columbia University and is considered one of the fathers of value investing. Buffett has cited West, a 1930s Hollywood temptress and comedienne, in his letters to shareholders.

‘Thick Skin’

Buffett, who built Berkshire into a business valued at more than $250 billion through stock picks and takeovers, has told shareholders that they shouldn’t expect the company’s past rate of growth to continue. The increase in book value per share, a measure of assets minus liabilities, is slower now than in Buffett’s first decades in charge, because the company’s size makes it harder to expand as quickly.

The billionaire has also been critical of his own performance. In March, he called his 2012 results “subpar” for failing to increase Berkshire’s book value per share at the same rate as the Standard & Poor’s 500 Index, including dividends.

Kass, whose company is based in Palm Beach, Florida, received an MBA from the University of Pennsylvania’s Wharton School in 1972. He said he’s preparing for a different sort of criticism at the meeting.

“I do know Mr. Munger is going to call me a chump for being short his stock,” Kass said. “I’m ready for the put- down. I have thick skin.”

Munger, 89, didn’t respond to a request for comment sent to an assistant. Schroeder is a columnist for Bloomberg View.

To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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