Warren Buffett takes $7.5 Billion stake in Goldman Sachs
September 23, 2008
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RELATED TICKERS: GS
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That represents roughly 20% of Buffett's available cash. For several days I have been discussing Goldman and the patent fact that it is grossly undervalued. When I say it nothing happes, the Craps gamers come at me with their pitch forks and Medieval Times costumes posting messages to me in DruidSpeak which are of course meaningless. The guys with the 98 or higher Craps scores , play the game in dollar stocks, even though they can't short them in the real world. That is not my style. I am a long term value investor and that has been tough this year when the markets are trying to destroy everything including stocks like GS, GE, and many others and Obama wants to raise the capital gains. hmmmm I wonder if he has ever owned a share of stock in his life.
Buffett vindicates what I have been saying about Goldman. Buffett does not buy junk, knows a good value when he sees it and is putting a very large chunk of change to work in GS. Buffett is here to stay.
Why do we absolutely know that Goldman is under valued? Its valuation is 1/3 that of the most sound investment bank holding companies. GS has no mortgage exposure. Most of what they do does not require capital outlays, not in M&A which will soon be huge across the globe in banking, not in trading, not in bonds, not in investment strategies... These have been the traditional profit centers that have propelled earninigs and will continue to propell them in the future. Thus even a very conservative multiple says GS should trade at three times its multiple or well over 300 a share. It trades at roughly book at this moment.
But what does Warren Buffett know compared to Richard Bove of Ladenburg Thalmann & Co. Inc. He and Mary Whatever? were the analysts that dowgraded Goldman and came out with a revised lower estimate and when earnings came out they looked like idiots. Let me tell you about Ladenburg Thalmann & Co. Talk about an investment banker on life support... Their stock sells for $2. You can't even short it because it is self shorting stock. Q2 they lost 3 cents a share and are in the process of taking over Triad so they can lose money for triad's clients as well.
All of a sudden Bove has a lot to say about Goldman, negative of course but the point of it is that his firm Ladenburg Thalmann is a Goldman competitor as much as a mosquito can be a competitor. But the point is that when you read articles and this loon talks, he is FOS. He always tempers his arguments however by saying, "But... I wouldn't bet against Goldman." But you will send hedge funds to their doom based on your "recommendations."
The Crappers aside, Bove aside. I am setting the flag in the ground. Goldman has bottomed. The remaining 4% of shorts in the stock are going to need life support in the morning. Goldman was up about 10 points in the aftermarket. I submit that the mutual funds as stupid as they are will stop selling the bottom of this market. Mutual funds buy the tops and sell the bottoms. You can always tell their handiwork. They just sell stuff no matter how good or bad... locking in their losses.
I have to go put on my silly Knight in Armor costume and await the cryptic comments of the Crapper all stars.
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