new thread, page-142

Life doesnt get easier than being a Berkshire Hathaway holder.
With the confusion of so cold LBO and investment banks in turmoil with high debt obligations, here we have a wonderful business that has $40bn to play with sitting on the Balance Sheet!

hehehehe.... ahhh, whats all this fuss about sub prime??

Investment turmoil presents some great bargain buys for acquisitive Buffett
Josh Hamilton, New York
August 4, 2007

BERKSHIRE Hathaway chairman Warren Buffett is ready to spend $US40 billion ($A47 billion) to $US60 billion on an acquisition, and his opportunities are expanding as stocks fall and leveraged buy-outs dry up.

Shares of health insurers, steel makers and department stores are as much as 18 per cent cheaper than in May, when Mr Buffett said he would "figure out a way" to come up with $US60 billion for the right deal. WellPoint Inc, Nucor Corp, Kohl's Corp and dozens more companies are now closer to meeting his investment criteria.

"A time of turmoil among conventional investors on Wall Street is helpful for Berkshire Hathaway," said Thomas Russo at Gardner Russo & Gardner. Mr Buffett's "patience has put him in a position where he certainly has the capacity to act".

Mr Buffett, 76, would have no trouble funding purchases because his company has $US46 billion of cash. LBO firms, which have agreed to $US700 billion of takeovers this year, face higher borrowing costs and skittish investors who won't buy the loans and bonds that they need to finance an average of two-thirds of their deals.

"If he can pull off a big acquisition, it creates a lot of value," said James Armstrong, president of Henry H. Armstrong Associates, whose biggest holding is Berkshire. The shares, which rose at an annual rate of 21 per cent over the past two decades, are virtually unchanged this year at $US110,000. Mr Buffett declined to comment.

Berkshire is expected to announce that second-quarter profit from insurance underwriting fell for the first time in a year, according to Charles Gates, an analyst at Credit Suisse Group. Profit before investment gains or losses rose 7.8 per cent to $US2.22 billion on higher interest income, according to Mr Gates, who has a "neutral" rating on the stock.

Mr Buffett built Berkshire into a holding company with a $US169 billion market value over four decades, using premiums from insurance units such as Geico Corp to fund investments and takeovers.

"We will need major acquisitions" to produce "truly satisfactory" earnings growth, he said last year in his annual report. Investors shouldn't expect the 2006 gains from the company's insurance units to be repeated, he said in March.

Mr Buffett set his takeover sights higher in May, when he said Berkshire would spend as much as $US40-$US60 billion, even selling some of its stock holdings to finance an acquisition if available cash was not enough. In annual reports as far back as 1998, he said he was looking for a $US5-$US20 billion deal.

His investment criteria included companies with "good returns on equity", little or no debt, "simple" businesses that he could understand, and consistent earnings, Mr Buffett said in his latest annual report.

Berkshire disclosed in May that it owned 979,000 shares, or 0.16 per cent, of Indianapolis-based WellPoint, the second-biggest US health insurer. Shares of the company, which has a market value of $US45.5 billion, fell 6.5 per cent during the past three months.

Mr Buffett disclosed in March that Berkshire held a 4 per cent stake in South Korea's Posco, Asia's third-largest steel maker, which has a market value of about $US48.2 billion.

After making bets against the US dollar starting in 2002, Mr Buffett now prefers to hedge against the currency by buying assets outside the US. He paid $US4 billion for 80 per cent of closely held Israel-based toolmaker Iscar Metalworking last year, his first non-US acquisition.

Kohl's, the fourth-largest US department store operator, is another company that might appeal to Mr Buffett, Mr Armstrong said. The retailer, with a market value of $US19.5 billion, has increased earnings at an 18 per cent annual rate during the past five years, and debt equals 19 per cent of equity.

The question about Kohl's is whether the brand and business model are dominant enough to insulate the company from competition, Mr Armstrong said.

Berkshire owns furniture and jewellery retailers, including Nebraska Furniture Mart and Borsheim's Fine Jewelry. It had a $US936 million stake in Wal-Mart Stores, the world's largest retailer, at the end of the first quarter. Ikea, the No. 1 home furnishings retailer, is among the closely held companies that might interest Mr Buffett.

There was no guarantee Mr Buffett would make a larger deal soon, even as potential targets became more affordable, Monish Pabrai of Pabrai Investment Funds said.

Mr Buffett has stressed the importance of buying companies with management he can trust.

"Just being cheap isn't enough," Mr Pabrai said. "You need seven moons to line up for Berkshire to act. We've probably got a couple more moons lined up without private equity in the picture."

BLOOMBERG