As the famous investor unveils his biggest deal yet, the $37.2bn takeover of Precision Castparts, here are six of his most notable transactions.
In September 2008, at the peak of the financial crisis, Buffett stunned Wall Street by investing $5bn (£3.2bn) in Goldman Sachs. The complex deal gave Buffett $5bn of preferred stock paying a 10% dividend and the option to buy a further $5bn of shares for less than their market value at the time. The result? Goldman got some much-needed cash along with the Buffett stamp of approval and Berkshire Hathaway eventually made a profit of more than $3bn.
Buffett’s maxim of buying when others are fearful failed with Tesco. He started buying shares in Britain’s biggest retailer in 2006 when Tesco appeared all-powerful. In 2012, Berkshire Hathaway increased its stake to more than 5% and became Tesco’s third-biggest shareholder after Tesco issued a profit warning. But Tesco’s problems mounted, culminating in last year’s accounting scandal, and Buffett admitted the investment was a “huge mistake”.
Buffett advocates buying companies whose products you like and his 9% stake in the world’s biggest soft drink maker is an exemplar of that strategy. Buffett, who is teetotal, claims a quarter of his daily calories come from drinking Coke. He has described Coke as an “inevitable” company likely to be around for ever; Berkshire Hathaway has made billions from its stake. Last year, Buffett ran into trouble when he said Berkshire Hathaway abstained on a bumper pay deal for Coke’s management because it was “kind of un-American” to vote against Coke.
Berkshire Hathaway started buying shares in the giant US mortgage lender in the late 80s and came to own almost 9% of the company. But Buffett became concerned that Freddie Mac was taking on too much risk to meet quarterly earnings forecasts and sold almost all Berkshire’s stake in 1999 for a $2.75bn profit. Freddie Mac was bailed out by the US government in 2008 after racking up billions of dollars of losses from defaults on mortgages.
Buffett viewed Gillette as another inevitable brand whose dominance in shaving products was akin to Coca-Cola’s in beverages. Berkshire Hathaway began buying shares in the late 1980s and became Gillette’s biggest shareholder. Berkshire Hathaway made an estimated $4.4bn paper profit when Procter & Gamble bought Gillette in 2005 and Buffett’s company became P&G’s biggest investor before swapping its shares for P&G’s Duracell business and $1.7bn of cash last year.
Berkshire Hathaway joined forces with 3G Capital, a private equity firm, to buy Heinz for $28bn in 2013. Buffett said the purchase was “my kind of deal” and that he had sampled Heinz’s tomato sauce many times. In March, Buffett orchestrated Heinz’s $40bn merger with Kraft, creating a stronger counterweight to the purchasing power of retailers. The combined company faces a challenge in adapting to the changing eating habits of US consumers, who are opting for fresher, healthier options.
This article was written by Sean Farrell, for theguardian.com on Monday 10th August 2015 15.48 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010