Warren Buffets New Groove

Issue 26

07.06.20 - Warren Buffett's Berkshire Hathaway reclaimed a glimpse of its former glorious self by putting some cash to work with its purchase of natural gas assets from Dominion Energy. Many believe that this deal could spark a broader turnaround for the “Oracle of Omaha”, who is approaching his 90th birthday this August.

Berkshire Hathaway released a statement Sunday announcing that the Dominion acquisition will cost nearly $10 billion. Despite the massive looking scale of that deal, it is miniscule in comparison to the more than $137 billion in cash that Berkshire Hathaway had on its balance sheet at the end of the first quarter of this year.

In fact, Berkshire itself is only paying around $4 billion in cash in exchange for the Dominion assets. Buffett individually is taking on nearly $6 billion in debt to complete the deal. Buffet has been discussing an “elephant sized deal” within Berkshire Hathaway for over a year, and many speculate whether this deal reaches that scope – leaving one to assume that a larger deal must be in the works at Berkshire Hathaway.

The company's last major deal was the purchase of aerospace parts maker Precision Castparts for $37 billion in 2015. Nonetheless, the Dominion acquisition could be a sign that Buffett is finally willing to dip his toes back into the M&A waters, and many investors might welcome such a development.

Shares of Berkshire Hathaway rose 2% in early trading Monday, but the stock is down overall nearly 20% this year. Berkshire is lagging the broader market despite the fact that it has a 5.7% stake in Apple, which has soared 27% in 2020.

Source: New York Times