The Buffett Sell Signal

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$%*#) 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 . . .

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

Comments

[Lisa]

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

What's the 7.2%? There's no stock in the table with that decline.

[Uncle Bill]

Thanks for reprinting what I read on Bloomberg. No alpha here.

[Kerbouchard]

Hmm.... yeah... good research here... last time I saw Buffett owned 17.2% of USG! That's not considered an "investment or acquisition"? You're saying what? That people thought Buffett would buy more or all of USG? I don't think that was ever a rumor... Terrible article even besides that.

Institution Name Shs Held Shs Chg %Chg $Chg* %Out %Port Rpt Date
Berkshire Hathaway Inc. 17,072,192 0 0.0 40,290,372 17.2 1.4 06-30-07

[jacksonmotala]

how to get a business finance from you

[RonB]

Buffett already owns 17% of USG. To say its a sell signal that he isn't buying the entire company is absurd.

[Carpe Max]

Check out this interactive map from NewsVisual that shows Warren Buffett's connections in the business world www.newsvisual.com/new... . Some really amazing information on an extraordinary individual.

[BarryRitholtz]

ALEX, I'LL TAKE READING COMPREHENSION FOR $100

HAS BUFFET ACQUIRED USG? NO.

HE OWNS A 17% PIECE OF IT.

AN ACQUIRER OWNS 100%