Berkshire Hathaway’s Warren Buffett plans to make a huge acquisition

Warren Buffet is a veritable legend by now. The New York investing guru has made billions over the decades using a strategy that seems simple on the surface: Investing in what you understand and believe in and holding the investment over a long period of time. Following his own advice may have landed Buffet among the richest people in the world, but this 88-year-old man with 84 billion dollars is still not losing steam. Buffet appears to be extremely motivated to this day and in an inspiring expression of business acumen, he recently expressed his intent to make an “elephant” sized purchase to further increase the Berkshire Hathaway portfolio and make the company’s stock price rise even more.

If Buffet’s previous track record is of any indication, in all likelihood, he will go through with the decision. Therefore, it might be a good time for investors to stack up on some BRK.A stock shares for the future. Even if Warren Buffet doesn’t secure the next big acquisition for Berkshire, the company’s stock has been steadily delivering amazing gains to its investors for over 45 years by now, so it’s a wise decision either way. However, new players need to be considered as well. If there is no steady flow of young investors, the stock market may take unwanted damage. Given the state that most Millenials are in right now, in terms of finance it may be a hard endeavour. Companies are trying to attract this new breed of investor through incentives and welcome gifts. The increasing number of no deposit bonuses in 2019 is a primary example. The brokers offer as much as they can to newcomers, just to shore up their constantly growing lack of fresh speculators. It may be on the Forex stage right now, but the stock market is next.

Buffet shared his aspirations in the latest shareholder letter

The Sage of Omaha talked about his intentions to make a large acquisition in his annual letter to the shareholders that was published in February. Buffet said he very much wanted to make the next big purchase for Berkshire but did admit that the deal might take a while, as the uptrend of the stock market has created a situation, in which taking over a large company may prove irrationally costly.

“Prices are sky-high for businesses possessing decent long-term prospects,” Buffet wrote, also saying that this “disappointing reality” probably means that Berkshire Hathaway might have to be content by growing the sizable money reserves it’s been accumulating for a little while.

He concluded his point his saying that the company does “continue, nevertheless, to hope for an elephant-sized acquisition”.

Berkshire Hathaway determined on securing the next big deal

Berkshire’s last big deal was when the company bought Precision Castparts, the American industrial manufacturing giant for 37 billion dollars back in 2015. Only 4 years have passed since then and the mastermind behind Berkshire Hathaway seems eager to move on to the next target.

But it’s not like Buffett has been idle during those 4 years. Berkshire also attempted to purchase Unilever 2 years ago in 2017, however, the beauty product and foodstuff making British-Dutch transnational company refused their offer. This came as a surprise to many because Buffett was reportedly pretty close to securing the deal. He didn’t manage to do so in the end and the acquisition did not happen.

The issue of the upcoming acquisition will definitely be raised at Berkshire’s annual shareholder meeting that will be held in May in the state of Nebraska.

Berkshire has too much cash that needs to be spent

By all accounts, the company currently possesses over 110 billion USD in cash resources and securities. This is a mind-boggling number, but nevertheless, Berkshire needs to spend it, as it’s of no use sitting idly.

The choice is pretty limited as well. Whatever company they choose to buy would probably have to be worth over 25 billion to warrant the purchase.
Experts think that Warren Buffett might be looking towards FedEx, given that the man has a demonstrated interest and affection towards transportation companies. Berkshire bought the Burlington Northern Santa Fe railroad back in 2009 and owns percentages of Southwest Airlines, Delta Airlines, American Airlines, and United Airlines. Considering this, it doesn’t seem like much of a stretch to think that Buffet might be interested in another major acquisition in the same area of business. Whether it’s FedEx or another airline remains to be seen. Maybe Berkshire will completely take over one of the companies it already has stock in.

Leave a Reply