I am quoted in the Washington Post on the Procter & Gamble proxy fight.
“It’s at least a temporary victory for Procter & Gamble, assuming the vote is not reversed,” said David Kass, a finance professor at the University of Maryland. “For the time being, it keeps Nelson Peltz off the board and permits P&G to proceed with its own plan to turn the company around.”
I am quoted in the Washington Post on Puerto Rico bonds.
“The average investor on the street will be unaffected,” said David Kass, a professor of finance at the University of Maryland. “If a small investor did invest in a municipal bond mutual fund, Puerto Rico would represent no more than 1 or 2 percent. This will have an infinitesimal impact on an investor investing in municipal bond funds.”
I am quoted in TheStreet on the proposed tax cut implications for Warren Buffett.
The combination of a reduction on taxes on future earnings, which will add billions of dollars to after-tax income, and Berkshire’s deferred tax liability on its $65 billion of unrealized capital gains at end of second quarter would be substantially reduced, resulting in an increase of at least 10% to 15% in Berkshire’s price per share, said David Kass, a finance professor at the University of Maryland’s Smith School of Business in College Park.
“This would then result in a proportional increase of at least $7 to $10 billion in Buffett’s wealth,” he said. “It is important to note, that Warren Buffett, who has approximately 99% of his wealth invested in Berkshire Hathaway, plans to donate all of his shares in Berkshire to charity, primarily the Bill and Melinda Gates Foundation.”
I am quoted in Kiplinger’s “8 Best Buffett Stocks for Retirement”.
(1) Apple (AAPL):
David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business who studies Buffett and is a Berkshire shareholder, notes that customer devotion to Apple products and services almost serve as an annuity. “Apple may be viewed as a ‘subscription model’ with a loyal customer base very likely to purchase future products and services,” Kass says.
(2) Bank of America (BAC):
“This is a very well run bank that should benefit as interest rates rise in the near future,” says Kass.
(3) Berkshire Hathaway (BRK.A)
“I would recommend Berkshire Hathaway as the best retirement stock of all,” Kass says. “Its stock represents ownership of over 90 companies across numerous industries along with a diversified portfolio of stocks.” True, Buffett and partner Charlie Munger are getting up there in age –87 and 93, respectively – but the company boasts what Kass calls a superior management team. No successor has been named publicly, but Todd Combs and Ted Weschler are Buffett’s chief stock-picking lieutenants. Each already manages more than $10 billion worth of Berkshire’s investments. Either Combs or Weschler (or possibly both) are thought to be behind the lucrative move into Apple stock.
(4) Kraft Heinz (KHC)
“Warren Buffett considers 3G Capital to be the best operating managers in the world,” says Kass. “They are likely in the future to partner with Berkshire in the acquisition of other food companies.”
Warren Buffett was interviewed on CNBC on October 3, 2017 from 8:00 – 9:00 a.m.
The highlights include:
(1) Berkshire Hathaway is buying 38.6% of Pilot Flying J (truck stops) and will own 80% in a few years.
(2) Stocks are fairly valued at current interest rates.
(3) A tax cut is likely this year which is why Berkshire is realizing losses on stocks this year, but not realizing gains. A tax cut will increase corporate profits and, therefore, stock prices over time. This will benefit the 1,000,000 shareholders of Berkshire.
(4) Warren Buffett has confidence in Tim Sloan, CEO of Wells Fargo.
(5) Bank of America is well run by its CEO, Brian Moynihan.
(Note: This blog post has been published by ValueWalk.)
I am quoted in a Washington Post article about the CEO of Equifax resigning.
“The CEO should be held accountable, and the chief executive officer is also the chief risk officer, and clearly this company took on risk that resulted in its hacking problem,” said David Kass, a professor of finance at the University of Maryland. “I think the market and investors will be pleased with this decision. A new CEO coming in hopefully will be more security-conscious, with major experience in this area.”
At a recent celebration of the 100th Anniversary of Forbes Magazine, Warren Buffett predicted that the Dow Jones Industrial Average (DJIA) will reach 1,000,000 in 100 years. Since the DJIA is currently at 22,350, this would require a compounded annual return of 3.9% over this time period.
If the DJIA will reach 1,000,000 in 100 years, then how long will it take for Warren Buffett’s Berkshire Hathaway (class A) shares to reach $1,000,000? At their closing price of $273,139 on September 22, 2017, these shares will reach this target price in 16 years if Berkshire matches its compounded annual gain in its price per share of 8.5% that it has achieved over the past 10 years. If its growth rate matches that of the S&P 500 with dividends included over the past 50 years of 9.7%, Berkshire will reach $1,000,000 in 14 years.
Berkshire’s compounded growth rate in share price over its 52 year history has equaled 20.8% per annum. Since this performance has more than doubled that of the S&P 500 over this time period, it is not unreasonable for Berkshire to continue to outperform this index and reach $1,000,000 per share sooner.
Berkshire Hathaway’s assets are largely comprised of over 90 largely autonomously managed companies in numerous industries. Its businesses are well-managed as is its portfolio of common stocks. With $100 billion in cash on its balance sheet and generating over $1 billion in free cash flow per month, Berkshire is likely to make major additions to both its stable of companies as well as its common stock portfolio. These additional investments will provide a steady source of growth in earnings as well as to its share price over time.
Warren Buffett’s magic number of 1,000,000 will be achieved for Berkshire’s common stock long before it is attained for the DJIA.
(Note 1: Berkshire Hathaway class B shares closed on September 22, 2017 at $181.86. Since they are valued at 1/1,500 of each class A share, their price when Berkshire class A shares reach $1,000,000 would be $666.67 per class B share.)
I am quoted in the Washington Post with respect to upcoming changes in monetary policy at the Federal Reserve.
“The stock market has essentially been expecting this for a while,” said David Kass, a professor of finance at the University of Maryland. “It will be a gradual unwind of the Fed balance sheet and has been incorporated into current prices.”
Kass said that so far, the Federal Reserve has straddled a careful line and fulfilled its twin goals of price stability and maximum employment. Now the central bank wants to begin easing back and let the economy run on its own.
“In terms of interest rates, the goal is to get back to a level before quantitative easing,” said Kass, referring to the Fed’s strategy of buying government bonds, which helped keep interest rates low. Kass said he expected interest rates to gradually rise to around 3 percent. Rates are between 1 and 1.25 percent currently.
I am quoted in a Morning Consult article about a poll for the Bloomberg Global Business Forum that indicates U.S. support for free trade in the Trump era.
“Even one basic economics class shows that free trade is a way to maximize consumer welfare for all,” David Kass, professor of finance at the University of Maryland School of Business, said in a phone interview Friday. “There are always winners and losers, of course. But I think the majority of people have seen the benefits of free trade over recent years and decades.”
But American consumers are still likely to favor free trade since it largely leads to lower prices, according to Kass.
Americans “are able to purchase goods from other countries that may be less expensive than those produced here,” he said. “This would result in increased purchasing power for the consumer and an increase in standard of living.”