Warren Buffett’s high-profile call to buy U.S. stocks may have its skeptics, but the often-pessimistic Doug Kass isn’t among them.
(Earlier this year, Kass generated some headlines by publicly betting that Berkshire Hathaway’s stock would fall, citing Buffett’s “investment-style drift” and “bombs” among Berkshire’s stock holdings. In March, he listed 11 Reasons to Short Berkshire. The stock is down almost 13 percent year-to-date.)
Writing in TheStreet.com today, the Seabreeze Partners Management founder and president notes that Buffett has “made only three boldly positive market calls in his career.”
The first came in 1974 when Buffett said, “I feel like an oversexed man in a harem. This is the time to start investing.” The Dow almost doubled over the next two years.
The second came in 1979, when Buffett told Forbes that “stocks now sell at levels that should produce long-term returns far superior to bonds.” That prediction also proved to be correct.
The third positive call from Buffett came last Friday. While Kass notes that we’ll be able to judge Buffett’s prediction “only with the benefit of time … when he has waxed enthusiastically, he has proven to be correct.”
Kass sees more evidence that an upturn is coming in the lukewarm response to Buffett’s call to action.
“I would also observe that the widespread dismissal of the Oracle’s positive remarks by so many (including the typically permabullish media) is classic evidence of an inflating negativity bubble, which leads me to believe that an advance might be closer at hand.”
This is very interesting and I agree with Kass’ opinion. If you take a look at some of South Africa’s bluest of blue chips there are some real positions to take here.
This blog has always been about putting things on the line. I am going to put my money where my mouth is and take a punt on the following stocks:
I am going to invest R100 000 in each of these shares and put them in “the bottom drawer” for 5 years. Here are my predictions and target prices for each:
- MTN target price is R300 unless a buy out happens before that (which is likely). The buy out could be at around R150 – R250 per share. The current price is at around R74
- My Sasol target price is R1 000 in 5 years time. This is a remarkable company with such a strong business. It’s technology is second to none and there are huge projects in the pipeline. I am going conservative at R1 000. The current price is at around R230
- Gold Reef is also a possible “buy out” share. In fact, like MTN, I think this is a near guarantee. The buy out should happend at around R25 – R40 per share. The current price is R16.
- Naspers is full of options and incentives for directors that sit much higher than the current share price. I am a big believer in the power of internet businesses and this is a huge play for Naspers. Their current price is around R136 and in 5 years I think this share could be pushing R600.
Here is my bet:
- MTN – R100k – 1 351 shares – R99 974 current value
- SOL – R100k – 435 shares – R100 050 current value
- GDF – R100k – 6 250 shares – R100 000 current value
- NPN – R100k – 735 shares – R99 960 current value
GDF 1 Year
MTN 1 Year
NPN 1 Year
SOL 1 Year
MTN, sasol and Naspers are sure fire bets…doesnt take rocket science to know that…not sold on gold reef though…well have to see
agreed