Berkshire’s Investment in RH (formerly Restoration Hardware)
I am quoted in a Bloomberg article “Berkshire Takes on Short Sellers With Bet on Furniture Retail”
“They have a certain limited circle of competence and within that circle of competence is furniture stores,” said David Kass, a professor of finance at the University of Maryland’s Robert H. Smith School of Business.
The relatively small size of Berkshire’s stake in RH, which totaled $206 million at the end of the third quarter compared to Berkshire’s $56 billion bet on Apple Inc., likely indicates it was made by one of Buffett’s two investing deputies, Todd Combs or Ted Weschler, according to Kass. Berkshire didn’t respond to messages seeking comment on which investment manager purchased the stake.
Whoever made the RH bet likely perceived the stock as under-priced at the time of purchase, even if it was high on an absolute basis, according to Kass. And Berkshire hasn’t shied away from buying stocks at relatively high levels. One of the deputies has spent the past year snapping up Amazon.com Inc. shares, which now trade around $1,745 and more than 80 times estimated profits.
“Maybe they saw a certain growth opportunity here that other analysts are missing,” said Kass. “Much of their investment career is to try to find those rare under-priced opportunities where they expect to outperform the market.”
