najdorf

Doug Kass's Killer Shorts - Barron's

About a year later, I'd say Kass's calls look pretty far off the mark. He seems like the kind of guy who's more interested in being contrarian and looking smart than making the maximum amount of money. All of his shorts were atypical calls and few are down more than the SPY (down ~35% since his article) while many have outperformed the SPY significantly.

If one had a short bias as of last May, one could have done much better shorting just about any financial other than BRK/WFC/AXP - look at BAC, C, WM, AIG, FNM, FRE, WB, etc over the year. I know all about hindsight, but if your thesis is that financials are s**t why would you short the strongest and ignore much weaker companies still trading at decent prices? Why not short people who are in the same business as BRK with more leverage and less competence?

Likewise in consumerland: if the consumer is weak, why would you short toothpaste and cereal instead of cars and luxury goods? You could have done much better shorting GM or most clothing retailers. Auto sales can fall a lot faster than cereal sales and GM has been obviously over-levered and unprofitable for years, yet the shares were over 20 a year ago (I was surprised too).

He also totally missed the fact that commodities were in a bubble last spring/summer. Short CHK, FCX, etc.

Overall it seems that Kass overlooked the fact that the best shorts are companies with broken business models, over-exuberant speculative action, or excessive leverage - you want some chance that the stock explodes completely if you're going to take the risk of shorting. While you might make 10-20% shorting companies that will experience moderate but survivable business declines in the worst economic conditions in decades, this is a pretty terrible short list given the shorts that were available last year. It would seriously take you a while to find worse shorts than these - even MCD, WMT, and most utilities are down over 1 year. I didn't make any short calls last year, but I'd like to think that even I would have stumbled across one true disaster in a list of 10 shorts a year ago. None of his picks have even come close to blowing up.

Kraft Foods: Time to Put This Cash Cow Out to Pasture?

No one ever went broke over-estimating the appetite of the American public for fatty snacks.

The reason people like WB like Kraft is that it produces steady cashflow. The debt is a little high, but borrowing costs are low for this company - why not? If they ever finish this restructuring and get focused on incrementally pushing up pricing and share for core brands you're going to see nice steady growth.

The stock has been overpriced periodically in the last few years up in the mid-high 30s. In the 20s the dividend makes it worthwhile.