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Buffett Sell Signal

Posted By Barry Ritholtz On October 1, 2007 @ 7:00 am In Corporate Management,Financial Press,M&A,Psychology,Trading | Comments Disabled

Call it revenge of the rumor mongers: So far this year, Warren Buffett has been wrongly named as an acquirer seven times. In five of those instances, the stocks are now lower, with all but one down considerably.

Last week, we noted how unlikely it  was (Buffett to Buy Bear? Bull$%*# [1]) that Buffett would be an acquirer or even a major investor in Bear Stearns (BSC).

False rumors are no basis for an investing strategy — but this pattern, according to Bloomberg’s David Wilson, suggests that Bear Stearns has more downside to come:

"Speculation that Warren Buffett would come to the aid of Bear Stearns Cos., the fifth-largest U.S. securities firm, may be a signal to sell its shares.

Bear Stearns is the seventh company named as a potential target for an investment or acquisition by Buffett’s Berkshire Hathaway Inc. this year, Bloomberg News reports show. There’s no evidence so far that the billionaire investor followed through on any of the others, and the reticence allowed him to avoid losses.

Five of the companies — USG Corp., New York Times Co., Zurich Financial Services AG, Hovnanian Enterprises Inc. and Countrywide Financial Corp., in that order — trade at lower prices now than they were when the speculation surfaced . . ."

These rumored companies have fallen from 7.2% to down 41%:

 

Company Performance since Buffett Rumor
Zurich Financial Services -2.5%
Countrywide Financial -13%
New York Times -26%
USG Corp. -35%
Hovnanian Enterprises Inc. -41%

 

Wilson adds: "As the fourth quarter unfolds, Bear Stearns shares may be fated to fall."

Indeed . . .

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Source:
Buffett Sell Signal, Trading-Only ETF, Starbucks Call [2]
David Wilson
Bloomberg, Sept. 28 2007
http://www.bloomberg.com/apps/news?pid=20601039&sid=aLktOvGugNN0&


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2007/10/buffett-sell-signal/

URLs in this post:

[1] Buffett to Buy Bear? Bull$%*#: http://bigpicture.typepad.com/comments/2007/09/buffett-to-buy-.html

[2] Buffett Sell Signal, Trading-Only ETF, Starbucks Call: http://www.bloomberg.com/apps/news?pid=20601039&sid=aLktOvGugNN0&

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