Berkshire Hathaway Bets $954 Million on Capital One

Warren Buffett’s Berkshire Hathaway placed a $954 million bet on credit card and banking company Capital One in the first quarter, one of the few new stakes added by the investment group in a period when it was dumping billions of dollars’ worth of stocks.

The disclosure of the investment on Monday signaled Berkshire’s and Buffett’s comfort with the credit card industry and the health of consumers’ pocketbooks even as several regional banks have been swept up in financial turmoil.

Capital One describes itself as the third largest issuer of Visa and Mastercard credit cards in the US. Berkshire has concentrated its financial industry investments on a handful of large US banks — Bank of America and Citigroup — as well as credit card companies including American Express, Visa and Mastercard.

The regulatory disclosure on Monday also showed Berkshire exited its positions in US Bancorp and Bank of New York Mellon in the first quarter. The 2.6 per cent stake Berkshire purchased in Capital One complements its large bet on auto and home lender Ally Financial, which it made last year. Berkshire modestly trimmed its position in Ally in the first quarter.

Source: Financial Times