The biggest scripted annual meeting starts dancing right about now. Berkshire Hathaway (NYSE:BRK.B) is about to engage in what maybe the worlds largest and best attended annual meeting. As the market starts its annual adulation let us think about why a stock goes up or down.
Answer: Supply and Demand. The more investors want to buy they create demand and the price goes up. The reverse is also true.
So right now we have a media frenzy and love fest. Something similar to what Apple experienced not that long ago. But when everyone seems very positive where is the remaining buying pressure to come from.
In the past twelve months BRK.B has appreciated nicely by about $25 @share. The short position has grown smartly to 1.2% of float. At something just north of $100 @ share the shorts have balls. Money flow is 2.99 which indicates short-term bullishness.
Berkshire Hathaway is not a deep pond for the professional short. The short position has moved as high as 1.5% and bottomed at just north of 7% all in the past five years. In the past year the short position has fluctuated between 0.8% and 1.5%.
Warren Buffett will come with his annual speech that he is looking for acquisitions. Very little will be officially said about succession policy. The age clock will continue ticking.The primary reason for owning Berkshire Hathaway has been Warren Buffett. Soon the unifying narrative will be ripped asunder.
If you are wary enough to believe in the law of unintended consequences? If you believe in long tail risk and Black Swan Events then consider the merits of the short position. The stock will be bequeathed to charity (Buffett’s part that is) No dividend is paid. charities need income and funds to operate.
The shorts smell the opportunity. Uncertainty will prevail until the leadership stabilizes; if it ever does. Just look at Apple and the ongoing Steve Jobs vs Tim Cook conversation.
George Gutowski writes from a caveat emptor perspective.