Tiffany may have been too pricey for the Oracle’s taste, but the 89-year-old Buffett has made no secret of his desire to do another major deal, and soon.
In his February 2019 annual shareholder letter, Buffett wrote that he and vice chairman Charlie Munger, who turned 96 last week on New Year’s Day, continue to “hope for an elephant-sized acquisition.” And even at their ages, “that prospect is what causes my heart and Charlie’s to beat faster.”
Market too rich for Buffett’s blood?
Shields quickly added that he thinks that Buffett is probably not going to overpay for anything — no matter how badly he may want to do a deal.
“The market seems kind of expensive. So if everything is expensive, then the right thing to do is buy nothing,” Shields said.
Shields added that if there is a pullback, Berkshire could buy up the remaining shares of one of its airlines. Buffett loves the transportation sector, and Berkshire already owns railroad Burlington Northern Santa Fe.
“I expect most acquisitions will still be in the consumer staples and discretionary space, but the black mark that Kraft Heinz has left on the Berkshire track record has probably made Buffett a little gun shy,” Seifert told CNN Business. “The fact that Berkshire would have turned down Tiffany speaks volumes about the company’s reticence.”
A bigger move into tech by Berkshire?
Apollo wound up buying Tech Data for about $6 billion, or $145 a share. It had previously bid $130 a share for the company.
Apollo said in a press release last November that Tech Data had received a “superior proposal” from an unnamed rival bidder — which was said to be Berkshire Hathaway — prompting Apollo to raise its offer. Berkshire had no comment on reports that it was the other bidder for Tech Data.
But she added that Berkshire’s younger investing lieutenants Ted Weschler and Todd Combs have increased their clout at the company. Combs was recently named the new head of Berkshire-owned auto insurer Geico — which could make him a front runner to eventually take over for Buffett.
At the very least, the increased responsibilities for Combs could signal that the new guard at Berkshire might be more willing to make investments once considered verboten for the company.
But Tengler suggests that Berkshire could also put some of the cash to use by finally paying shareholders a dividend, especially since Berkshire stock has lagged the market lately. The company has only done so once in its history — in 1967.
“The irony is not lost on us that Buffett often invests in companies that pay a dividend but he is not willing to offer one himself,” Tengler said.
Source : CNN