Warren BUFFETT, the uber-BILLIONAIRE and CEO of Berkshire Hathaway (BRK.A or BRK.B), must be an avid reader of this blog. How else can you explain his recent purchase of 'bank-holding' company Goldman Sachs (GS)?? I (wrongfully but still gleefully) credit my 8/27/08 post titled 'RTOB: Six Reasons to BANK on Goldman' for showing the 'Oracle of Omaha' the light. UNwarranted and completely nonsensical boasting aside, here are some of the intriguing details behind Warren's newly acquired 10% stake in Goldman Sachs :
* Berkshire Hathaway Inc. agreed yesterday to a $5 Billion preferred stock investment in Goldman...this will immediately provide Berkshire a 10% interest in GS (effectively valuing GS at $50 Billion...fyi, at $129/share the current marketcap of GS is $51 Billion)
* Buffett also reserves to the right to buy an additional $5 Billion in GS common stock sometime during the next five years at $115 a share.(anecdotally thinking...looks like he is getting an Amazing deal here)
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1.) $4.5 Billion purchase of Marmon Holdings Inc., the Pritzker family's collection of 125 companies, in March
2.) $4.7 Billion bid this month for Constellation Energy Group (CEG), the largest
3.) Buffett also provided $6.5 Billion in April to help Mars Inc. buy Wrigley (WWY), giving Berkshire a stake in the chewing gum maker.
4.) Buffett also pledged $3 Billion in July to Dow Chemical Co.'s (DOW) $15.4 Billion takeover of Rohm & Haas Co. (ROH)
* Buffett's other $IGNIFICANT FINANCIAL stakes include:
1.) Wells Fargo (WFC - 9% stake)
2.) US Bancorp (USB - 4% stake)
3.) American Express (AXP - 13% stake)
4.) Wesco Financial (WSC - 80% stake)
5.) Moody's Corp. (MCO - 20% stake...even the greatest get it wrong sometimes)
* Buffett's Berkshire Hathaway is the Largest Shareholder for these 5 companies
* Buffett also owns less significant stakes in other financials including: Bank of America (BAC - 0.2% stake), M&T Bank Corp. (MTB - 6% stake) and Suntrust Bank (STI - 1% stake)
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Random
Thoughts
Of Brilliance: In this chaotic market the PSYCHOLOGY of shareholders matters perhaps more than anything else. Even though Goldman is giving Berkshire a bargain on its shares (I'm referring to the follow-up $5 Billion stake at $115/share), you CANNOT underestimate the psychological importance of being able to tell the investing public that Warren Buffett, arguably the world's $aviest investor of ALL TIME, is firmly behind your company and stock. I think this is a GREAT move for shareholders of both Goldman and Berkshire. Lastly, it will also be interesting to see how shares of GS react in the next 6 months to a year...wonder if this move by Buffet will end up marking the bottom in GS shares.
bloomberg.com/apps/news?pid=conewsstory&refer=conews&tk
http://www.cnbc.com/id/22130601/
Data Courtesy: Bloomberg + CNBC.com
Full Disclosure: I own shares of GS.
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