Doug Kass’ advice to Warren Buffett: Sell Apple

Our old nemesis says Buffett should have been “peeling out” of the stock before his $36 billion investment doubled.

apple buffett KassFrom Nicole Friedman’s “Warren Buffett Found His ‘Elephant’ With Giant Stake in Apple” ($) in Friday’s Wall Street Journal:

Mr. Buffett started to study Apple after one of his portfolio managers, either Ted Weschler or Todd Combs, bought about $1 billion in Apple shares for Berkshire in early 2016.

As he studied the company and questioned his great-grandchildren about their allegiance to Apple products, Mr. Buffett decided Apple was a retail company he could understand.

“I didn’t go into Apple because it was a tech stock,” Mr. Buffett said at Berkshire’s 2018 annual meeting. He cited the strength of the company’s brand and its capital return strategy. “I don’t think that required me to take apart an iPhone or something and figure out what all the components were or anything. I think it’s much more the nature of consumer behavior,” he said.

Berkshire’s bet has paid off. Apple’s shares soared 86% in 2019 and have climbed another 9.1% so far this year.

“What’s surprising is how fast it increased,” said Doug Kass, president of Seabreeze Partners Management Inc. Given the current size of Berkshire’s Apple stake, “it seems to me that it would be prudent for [Mr. Buffett] to be peeling out of some stock,” he said.

My take: What a maroon.

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  1. David Drinkwater said:
    The idea of re-balancing is not unreasonable.

    But re-balancing is about balance. Over-reaction is not balanced.

    We have seen time and again that Kass is not balanced.

    (Pity that doesn’t work out as a haiku.)

    February 21, 2020
  2. Jacob Feenstra said:
    Or Buffett could just do what he mostly does, holding on to stocks for an average of more than 7 years. Or better, he could do what he did with AmEx or CocaCola—25 years and counting. Buffetts is never into a stock for a quick run-up and then sell.

    February 21, 2020
  3. David Emery said:
    I suspect this is a play for ‘journalistic fairness’ – getting an arbitrary “different opinion”. True journalism would have investigated and rejected Kass’ views as demonstrably wrong, and found someone credible with a different view on Apple.

    February 21, 2020
  4. David Baraff said:
    Short term, I believe there may be more pain for AAPL and others because of the Coronavirus.

    Got in touch with my factory in China. Short story, they’ve applied for a permit to reopen but are STILL all at home and not in the office. It is clear that China is still far from getting back to normal.

    Another week? A month? Who knows.

    February 21, 2020
  5. Gregg Thurman said:
    Kass says sell AAPL. With his track record I’d assume that means it’s time to BUY AAPL.

    February 21, 2020
  6. Jerry Doyle said:
    I suspect from all that I am reading inside China and confirmed by some folk on this forum (such as David Baraff above) that matters will get worse before they get better. The virus is not contained and for the third time the CCP has employed a different counting methodology for new cases. So, I suspect that Apple similar to all global companies will take a hit.

    There is merit in what brother Gregg Thurman denotes: Buy AAPL. The question becomes when?

    Its beginning to look more and more that all of this is definitely going to bleed over into the 3Q. 4Q???

    Most all loss sales now are deferred to a later date. We have a $400 stock. That’s a no-brainer for me. What is mentally challenging is deciding when to buy up more shares.

    February 21, 2020
  7. Jerry Doyle said:
    BTW… I don’t sell Apple shares. I only buy. So, selling for me is not an option. I am long on Apple.

    February 21, 2020
  8. David Baraff said:
    I’m long too. Despite that I sold some covered calls because I believe, short term, AAPL is either going down, or at least, not going much higher.

    This is a very cautious minor bet, just to put my common to work for a bit. I sold calls with a strike price of 340 and expiration end of March. I don’t see us going much of anywhere over 5 weeks, as I see no catalysts on the horizon sufficient to drive us up a lot.

    Long term, yeah, AAPL is going to certainly be a $400 stock.

    February 21, 2020
    • David Baraff said:
      Wow. Sold those calls when AAPL was at $317. Just hit $311.

      February 21, 2020
  9. Martin Beutling said:
    Long term, AAPL will be okay, but I see it going down much more.
    As said before, from this point on I can’t see any catalysts to drive the stock in green territory.
    The day after the next conference-call will be bad and that’s the day I will go back into the Stock.

    February 21, 2020

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