Recently, there have been a spate of sovereign wealth funds buying big stakes in distressed financials. Singapore’s Temasek Holdings and GIC, China’s China Investment Corp, and middle eastern funds flush with oil dollars have all injected cash into Morgan Stanley, Citigroup, UBS and Bear Stearns.
In an interview on CNBC, Warren Buffett mentions that he has been approached by some financial companies about buying a stake too but he has not seen anything that has caused him to be interested. Here’s a short extract from the interview:
At the Omaha airport on Saturday, we will have the usual array of aircraft from NetJets available for your inspection. Just ask a representative at the Civic about viewing any of these planes. If you buy what we consider an apprpriate number of items during the weekend, you may well need your own plane to take them home. And, if you buy a fraction of a plane, we might even throw in a three-pack of briefs or boxes.
There are many reasons why an investor or a trader can lose money.
One main reason is being too fixated on the price of his stocks.
When Warren Buffett buys shares, he treats it as a purchase of a business (either whole or part of). The market price is simply a quote that he can use to buy up stakes. He can choose to take it or ignore it. If the price is favorable, he makes use of it to his advantage. If the price is not, nothing needs to be done.
Last week, Warren Buffett put $2 billion of Berkshire Hathaway’s cash to work by buying high-yield bonds issued by Dallas-based power producer TXU Corp.
Berkshire(NYSE:BRK) bought into two bond issues by TXU. One was a $1.1 billion purchase of 10.25% bonds at 95 cents on the dollar to give Buffett an effective yield of 11.2%. Berkshire also bought $1 billion of 10.5% PIK-toggle bonds (bonds whose interest can be paid out in cash or more bonds) for 93 cents on the dollar, giving an effective yield of 11.8%.
Back in 2002, Berkshire had actually purchased stock in TXU when it appeared close to bankruptcy, and then sold out at a large profit in 2004.
CNBC’s Becky Quick recently traveled to Omaha, Nebraska to shoot additional material for her one-hour special focusing on Warren Buffett’s whirlwind tour of Asia.
While Becky was there, Warren Buffett gave her a tour of the Berkshire Hathaway offices. He talked about some of the mementos he’s collected and their personal significance to him, and to his investing style. Here are some points from the conversation: