Randomly Noted

To get a sense of the investment savvy of Warren Buffett, look no further than the opportunistic investments he made over the past 18 months as cash infusions to some of the country’s better known companies. When Goldman Sachs was on the ropes, Buffett’s Berkshire Hathaway invested $5 billion. same with General electric to the tune of $3 billion. He also invested in Wrigley, Swiss re and Dow Chemical.

These $15.8 billion of investments came in the form of preferred stock securities – some convertible into common, some not. And they toss off annual dividends of about $1.484 billion. But here’s the real genius once again of Mr. Buffett.

Continue reading…

It's not that Warren Buffett has anything against Kraft. He likes the business with almost a 10% ownership. He doesn't like the current structure of the offer on the table for Cadbury

One of the many things you can say about Warren Buffett and Berkshire Hathaway is that the company and its CEO often engage in an aw-schucks, golly-gee homespun approach that can come across as understatement. Take, for example, the headline on this press release issued earlier today: “Berkshire Hathaway Inc. News Release.”

Nothing misleading about that. But man, what a news release it was…

Continue reading…

Attention Mom and Pop: An investment in Berkshire Hathaway (read Warren Buffett) is about to become more possible. Newswires reporter Geoffrey Rogow notes that as part of Berkshire’s offer to buy Burlington Northern, Berkshire will pay cash and stock – and the shares it will use are the Class B shares that currently trade for about $3,300 each. To help with the fractional share problem that could exist with a stock at that price, Berkshire said it will do a 50-1 stock split. which will drop the Class B shares to around $66 each.

This means a handful of other things as well – you could see Berkshire become eligible for an index like the S&P 500. And with that lower stock price, greater liquidity and inclusion in an index (if it happens) that funds try to mimic, you will introduce much more volatility into the stock price.

I realize Warren Buffett is buying Burlington Northern because he believes it’s a good business opportunity for his holding company, Berkshire Hathaway. But it feels like – and indeed is – an act of optimism which comes at an opportune time. If you read Peggy Noonan’s WSJ column, “We’re Governed by Callous Children,” over the weekend, you’ll know that she’s deeply worried about the future of the United States. Specifically, Noonan frets that America’s promise is more fragile than many of us realize, and there’s a real risk it could succumb to the “endless abuse” being inflicted by the political establishment. The piece’s tone is a bit overwrought but it does ring true, as so much of Noonan’s writing does.  So, when one of the world’s greatest investors spends a pretty penny on a storied American railroad, we feel good, proud and relieved. We are energized by the fact that a man with an exceptional business mind and temperament has faith that an investment in America’s ability to haul stuff at great distances will deliver sound returns. Buffett has a knack for P.R.; by describing his purchase as “an all-in wager on the economic future of the United States,” he is attempting to pierce the aura of anxiety and depression which Noonan described. “I love those bets,” he said this morning as news of the $34 billion investment poured out. We love them, too, because they suggest that there’s work to be done, businesses to build, money to be made, an economy to be nurtured, coal to haul. Continue reading…

It could be another steal of the century for Warren Buffett.

His Berkshire Hathaway and Leucadia National teamed up to buy (kind of) a big chunk Capmark Financial’s commercial mortgage business for a price between $415 million and $490 million. It’s a hard deal to get your arms around because no one is willing to talk about. Questions to Capmark about the potential transaction came back with the reply: “We are declining requests for information beyond that contained in the news release.”

Like the question of how much debt Berkshire and Leucadia might be assuming. (Berkshire hasn’t returned calls, either.) But we do know this – About 80% of the Capmark business as measured by assets is what Berkshire and Leucadia would be buying. In 2006, a KKR-led group bought 78% of Capmark from GMAC for about $1.5 billion and the repayment of $7.6 billion of debt.

Continue reading…

For all of those people preaching the simple,  populist approach to solving our financial crisis (let ‘em fail, let all those greedy devils fail!), it’s worth listening to the words of a very reasoned and seasoned folksy fellow from the heartlands of America who has seen a few things or two.

Warren Buffett, chairman of Berkshire Hathaway but more importantly a man many investors and fund managers worship and have tried to emulate over the years, believes the government had no choice but to step in to revive the near-dead financial system last year (and now).

In his annual letter to Berkshire shareholders, Buffett sets the scene for what happened last year: “As the year progressed, a series of life-threatening problems within many of the world’s great financial institutions was unveiled. This led to a dysfunctional credit market that in important respects soon turned non-functional. The watchword throughout the country became the creed I saw on restaurant walls when I was young: ‘In God we trust; all others pay cash.’”

Continue reading…