Kass: Timing of Buffett Cancer News May Hurt Berkshire Shares

Wednesday, 18 Apr 2012 07:05 AM

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Legendary investor Warren Buffett's disclosure he has stage 1 prostate cancer may continue to hurt Berkshire Hathaway stock, not so much due to the severity of the illness but due to the suddenness of the announcement, says strategic investor Doug Kass.

"The problem with this announcement is that the calculation of the company’s intrinsic value is impacted. The upside reward is now reduced," Kass, of Seabreeze Partners, tells CNBC.

Translation: the announcement caught the market off guard.

“Valuations must now be adjusted," Kass says. "The premium accorded in the marketplace for Buffett must be reduced because there is an unknown now."

"I actually sold a little stock in the aftermarket. I now want to revisit all my calculations."

Shares in Buffett's investment vehicle Berkshire Hathaway fell 2.6 percent after Buffett disclosed his illness.

"We expect modest weakness in the shares," Meyer Shields, an analyst at Stifel Nicolaus & Co., says in a note to investors, according to Bloomberg.

"Succession-related uncertainty remains one of the primary concerns underlying our hold rating, but we don’t think today’s news makes these concerns significantly more imminent."

Buffett, 81, has said he is has identified a successor but hasn't said who it is.

Other market observers say they're making no changes on the news.

"Despite the news, this is not a reason to sell (Berkshire). Fundamentals are still good at the company and the clear succession plan does give clarity about the future path of the firm," says Michael Yoshikami, chief executive of Destination Wealth Management in California, according to Reuters.

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