Problems for Coca-Cola $KO, $PEP, $BRK.B

Berkshire Hathaway is having its annual frenzy. Ponder the Bear Case Scenario in this core Berkshire Hathaway Holding even while Warren Buffett thinks its un-American to vote against its management.

Coca-Colas revenues are not as diversified as Pepsi. In any portfolio exercise this is a bad thing. Warren Buffet should understand this point perfectly.

Coca-Cola revenues are 74% sparkling beverages which is slow to no growth. Overall growth is from other drinks products which should speak volumes as to where the growth really is. Cola growth is negative in the USA. Investment in bottling operations is capital-intensive and returns are not accretive to Coca-Cola.

George Gutowski writes from  a caveat emptor perspective

Problems for Moody’s $MCO, $BRK.B, $MHFI

Berkshire Hathaway is having its annual frenzy. Lets take a look at Moody’s which is a large holding and reputedly on the sell list for Berkshire.

Since the sub-prime mortgage crisis and the reputational hit that ratings companies took Warren Buffett has been a net seller.  The problem is he has been slow at it. The problems are being fixed and the reputations of ratings companies are being rehabilitated. What Warren did not like is being fixed so maybe he should have taken the classic value investor approach and buy ugly followed by sell pretty. Seems like he has it backward here. He did not max out his thinking on this position.

George Gutowski writes from a caveat emptor perspective.


Berkshire Hathaway is having their annual frenzy. Ponder the Bear Case Scenario for one of their key publicly traded holdings. USG.

USG is the leading wallboard and gypsum-related panels producer in the U.S. This means housing, real estate, interest rates, employment and consumer confidence. Warren what part of the sub-prime mortgage and housing crisis did you not understand. Housing is in a mild fragile recovery. This stock does not have any drivers which indicate superior share wealth creation will occur. Add in the fact that they are highly levered in a low-interest rate environment does not create more confidence.

I suspect he is anchored in olde school thinking where you bought large and dominant without much regard to the entire supply chain. the days of dry wall shortage are well behind us and not likely to re-appear soon.

George Gutowski writes from a caveat emptor perspective.

Problems for General Motors $GM, $F, $TM, $VLKPY, $DDAIY, $BRK.B #WARRENBUFFET

Berkshire Hathaway is having its annual frenzy. Consider some problems for General Motors which is a large component part of Berkshire Hathaway’s portfolio.

When it comes down to it I believe Warren Buffett has a behavioural bias and tends to anchor on Big American stocks. GM which is really just finished up the restructuring already is having massive recall issues. the olde school big auto arrogance is back. GM will most likely lose share to foreign more nimble manufacturers. No one has a firm grip on the US market. expect inroads from Hyundai and Volkswagen among others. Global vehicle demand is very uncertain and subject to risks which Warren Buffett is not used to seeing. Automotive stocks sell off when macro concerns boil over. at any given point in time the question will be why are we holding this one.

George Gutowski writes from a caveat emptor perspective.

WellPoint Bear Case Scenario $WLP, $UNH, $ESRX, $RET, $HUM, $CI

WellPoint is about to release earnings. Ponder the Bear Case Scenario and see if you still have confidence in the long or is the short starting to look good:

Obamacare and the US Health industry overhaul has built-in huge uncertainty. Markets dislike uncertainty. The rest may just be bad history.

Transparency and competition will pressure pricing and profits for MCOs.

WellPoint has underperformed in the past few years and maybe poised for an upswing. If they stumble and investors lose faith the last diehards will bail and the momo will go wrong.

George Gutowski writes from a caveat emptor perspective.

ADP Bear Case Scenario $ADP, $SGSOY, $MHFI, $EXPGY

ADP is about to release earnings. Ponder the Bear Case Scenario as you contemplate a long or short.

Interest rates are low. Funds captured in float are not yielding much. It will be a while before rates climb high enough so that the float yields nicely. Then when rates go up clients will optimize against the float.

Some 15% according to some estimates of ADP’s revenues comes from the volatile auto dealer business. Cyclical big-ticket issues will not enhance growth.

PEO services while the fastest growing also have the skinniest margin. So fast growth will have little lasting impact. ADP needs to come up with new schtick.

George Gutowski writes from a caveat emptor perspective.

Moody’s Bear Case Scenario $MCO, $MORN, $MHFI, $EXPGY

Moody’s is about to release earnings. Ponder this Bear Case Scenario.

After the mortgage crisis the entire ratings industry took a reputational beating and quite rightfully so. But they survived but hopefully everyone has learnt to read their reports a little bit more closely.

If the market and economy dips Moody’s and others may take a few more slaps in the face which means more lawsuits.

Olde lawsuits are still out standing and it would be nice for shareholders to know they are settled. Just lawyers making fees for no good reason.

What is really left to generate growth. Ratings are ordered up when capital is issued. If deals requiring ratings slow then new fees will wither.

This company will be so easy to sue in the future for the slightest little miscue.

George Gutowski writes from a caveat emptor perspective.

Burger King Worldwide Bear Case Scenario $BKW, $THI, $WEN, $SBUX, $MCD

Burger King will be releasing earnings shortly. Ponder this Bear Case Scenario:

Fast food is an ultra competitive industry. Price competition breaks out at the drop of a hat. Labour and commodity prices are volatile. The minimum wage movement in the US is not helping labour productivity.

Burger King was just recently taken private and reorganized by private equity. Within a very short time it was re IPO’ed and foisted on the market again. not sure what was really changed over. Menu changes and store fixtures can be fixed without going private.

Miami connection makes it plugged in to Latin America. The private equity group was strong on Brazilian and cattle/beef connections. Now they decided to sell instead of having a captive outlet for beef and food commodity.

George Gutowski writes from a caveat emptor perspective.

Starbucks Gives a Twit. Was Zuckerberg Bitch Slapped $SBUX, $TWTR, $FB, #socialmedia

Starbucks has a neat little offer out. They are offering a $5 ecard if you connect your Starbucks account with your Twitter account. Looks like only one $5 ecard to a single friend. So if none of you friends sends you a Starbucks ecard well you now know where you stand with them. In the mean time Starbucks has access through you to all your friends.

Starbucks has long had those cards at the counter which get you a song of the week so this makes sense in their marketing thinking.

But was Zuckerberg Bitch slapped and left out or are they just doing segmented testing and its Twitters turn. What if you are following someone on both Twitter and Facebook. How will that look.

Oh and another thing. How is Lady GaGa going to play this she has like 41 Million followers?

George Gutowski writes from a caveat emptor perspective. He does not have 41 million followers.

Covidien Bear Case Scenario $COV, $BAX, $BDX, $ESLOY, $ILMN

Covidien PLC is about to release earnings. Ponder this Bear Case Scenario and consider if you still like the long case:

The firm’s soft tissue business still struggles due to J&J’s entry into the market.

Group purchasing organizations continue to garner more buying power and therefore put pressure on margins.

Regulators are getting tougher. To avoid or answer regulatory concerns R&D will go up as more and more testing will be required.

 The company’s commodified trocars product line  in the endomechanical business is facing difficult competition from Applied Medical. Growth is at risk.

George Gutowski writes from a caveat emptor perspective.