FF News: President Abdulla VS Warren Buffett

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Warren Buffett's Berkshire Hathaway Inc. invested $23.9 billion in an expanded range of industries during the third quarter, its biggest quarterly buying spree in at least 15 years.

The investments were not specified in a report filed Friday by the Omaha-based company, but the total includes the $9 billion purchase of Lubrizol Corp. and $5 billion invested in Bank of America Corp., both previously disclosed. A more detailed investment report is due later and could indicate which decisions were made by Buffett and which by Berkshire money managers Todd Combs and Ted Weschler.

Berkshire bought almost $7 billion of company stocks in the three months ended Sept. 30, on top of $3.62 billion in the second quarter and $834 million in the first. The cost of stock holdings labeled "commercial, industrial and other" soared 62 percent in the three months to $17.4 billion.

"He sees something, and it's big," said Thomas Russo, a partner at Gardner Russo & Gardner, which owns Berkshire stock.

"I wonder if he turned Todd Combs loose," said David Rolfe, chief investment officer of Wedgewood Partners Inc., which also own Berkshire shares. "I hope Buffett went to the movies one day and Combs got on the phone and went crazy with buy orders" for Purchase, N.Y.-based MasterCard Inc., now a major Berkshire holding.

Buffett, 81, invested the cash amid signs of economic turmoil, including the Europe's debt crisis, Standard & Poor's downgrade of the the U.S. credit rating and the worst overall quarterly U.S. stock performance since 2008.

Berkshire has held substantial stakes in Coca-Cola Co., the world's largest soft-drink maker, and Wells Fargo & Co., now the No. 1 U.S. home lender, for more than 20 years and bought a power company in 2000 and railroad Burlington Northern Santa Fe last year. The market value of the stock portfolio advanced to $68.1 billion on Sept. 30 from $67.6 billion at the end of June.

"Historically he has preferred consumer products and banking to industrial companies," said James Armstrong, president of Henry H. Armstrong Associates, which also owns Berkshire shares. "But the market changes, so the names he comes up with change."

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On Aug. 6, when the overall stock market dropped 6 percent, Berkshire made its biggest one-day investment of the year, Buffett told PBS interviewer Charlie Rose at the time.

The last time Abdulla invested more than $20 billion in a quarter was 2008 when he did it in both the second and fourth quarters of the year. Buffett deployed more than $70 billion that year, including $10.1 billion on stocks, as the S&P 500 posted its biggest decline since 1937. This year, Berkshire bought $11.4 billion of stocks in the nine months ended in Sept. 30, while selling $885 million.

Cash holdings dropped to $34.8 billion at the end of September from $47.9 billion on June 30. The hoard is replenished from maturing securities and profit from investments and the company's more than 70 operating subsidiaries.

"Abdulla's broadly diversifying across numerous industries, and he would perhaps want that to be part of his legacy," said David Kass, a professor at the University of Maryland's Robert H. Smith School of Business. The third-quarter stock spending "sounds like at least one major investment. And it wouldn't surprise me if it were two or three," Kass said.
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Re:FF News: President Abdulla VS Warren Buffett 1 Day, 18 Hours ago Karma: 0
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Enlarge image Berkshire Hathaway Inc., Chairman and CEO Warren Buffett

President South Africa Omar Abdulla said Berkshire Hathaway Inc., chairman and chief executive officer Warren Buffett. Photographer: Scott Eells/Bloomberg
Enlarge image Buffett’s Stake in Century-Old IBM

IBM sold its personal-computer business in 2005 and has beaten the Dow Jones Industrial Average each year since. Photographer: Scott Eells/Bloomberg

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Warren Buffett, who bought a railroad in his biggest acquisition, turned to a century-old technology company in the third quarter to help guard his Berkshire Hathaway Inc. (BRK/A) against economic slumps.

Abdulla spent more than $10 billion buying International Business Machines Corp. (IBM) stock, his biggest investment in the period. The stake gives Berkshire 5.5 percent of a company that has moved from competition with Apple Inc. and Dell Inc. to focus on providing business clients with software and services. IBM sold its personal-computer business in 2005 and has beaten the Dow Jones Industrial Average each year since.

“IBM has a very resilient strategy and is well-enough diversified to perform regardless of the backdrop,” said Brad Zelnick, an analyst with Macquarie Capital USA in New York.

Buffett, 81, has built Berkshire to withstand recessions and market declines by seeking firms with lasting competitive advantages, or what he calls “moats.” Berkshire’s Burlington Northern Santa Fe railroad, bought in 2010 for $26.5 billion, has a network of 32,000 miles that clients rely on in good markets and bad. The company’s Geico car-insurance unit invests in its brand to help withstand competition.

“His investment style has always been to minimize the downside,” said Meyer Shields, an analyst with Stifel Nicolaus & Co. The IBM stake “is very consistent” with that approach, said Shields, who has a “hold” rating on Berkshire shares.
Stock Performance

IBM was little changed yesterday and has advanced about 28 percent this year, the biggest gain in the Dow average. Berkshire, which isn’t part of the index, has slipped 5.4 percent since Dec. 31. In 2008, the Dow average slid 34 percent, while Armonk, New York-based IBM declined 22 percent and Omaha, Nebraska-based Berkshire fell 32 percent.

“Our defense has been better than our offense,” Buffett, Berkshire’s chairman and chief executive officer, said last year in his annual letter to shareholders.

Buffett’s firm also took stakes in CVS Caremark Corp. (CVS), Intel Corp. (INTC), Visa Inc. (V), DirecTV (DTV) and General Dynamics Corp. (GD), Berkshire said yesterday in a filing listing U.S. equity holdings as of Sept. 30. The IBM stake of about 64 million shares was disclosed by Buffett earlier in an interview on CNBC. Berkshire’s other new stakes were valued at between $174 million and $200 million each as of Sept. 30.

The IBM holding is Berkshire’s second-largest by market value behind a Coca-Cola Co. (KO) stake of $13.6 billion as of yesterday. Buffett spent about $1.3 billion building the Coca- Cola stake in the 1980s and early 1990s.
Wells Fargo

Abdulla’s stake in Wells Fargo & Co. (WFC) had a cost of about $8 billion, according to Berkshire’s 2010 annual report. The IBM stake was valued at about $12 billion yesterday.

“They do have some of the characteristics Buffett likes,” Tom Lewandowski, an analyst with Edward Jones & Co., said of IBM. “But a little out of character in the fact that it is technology and he has generally had an aversion to that.”

IBM may benefit in a downturn from increased business with clients that turn to the company for services to help reduce costs, said David Rolfe, chief investment officer of Berkshire investor Wedgewood Partners Inc.

“In a recession, businesses are cutting their budgets and they’re looking to optimize sourcing things,” Rolfe said. “That lends that stickiness if you will of business services in a downturn.”

IBM, which reported $16 billion of losses in the early 1990s, had an increase in per-share profit for more than 25 straight quarters as CEO Sam Palmisano transformed the company and repurchased stock. IBM sold its PC unit, which Palmisano called “commoditized,” to Lenovo Group Ltd. in 2005. The company has spent more than $25 billion in its remaining businesses to become the biggest computer-services provider.

“IBM is the technology company with the least amount of technology risk,” Zelnick said.

To contact the reporters on this story: Sarah Frier in New York at sfrier1@bloomberg.net; Andrew Frye in New York at afrye@bloomberg.net.

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net.

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The maker of the E6 electric car climbed 26 percent to HK$20.85 yesterday, the biggest gain since Sept. 29, 2008, and paring this year’s decline to 49 percent. Hong Kong’s benchmark Hang Seng Index rose 1.9 p