Warren Buffett has revealed that his investment company, Berkshire Hathaway, has bought a $1 billion stake in Apple.
In a regulatory filing, Berkshire Hathaway disclosed a holding of 9.81 million shares in Apple.
Warren Buffett, who has traditionally shied away from tech stocks, is known for buying “value stocks”, so it is being seen as significant for Apple.
Apple’s shares have fallen almost 30% over the past year but rose on May 16 and closed the trading session 3.7% higher at $93.88.
Slowing iPhone sales have led investors to question whether the company can maintain Apple’s huge profit levels.
Last week Apple temporarily lost its place as the world’s most valuable company after a fall in shares pushed its total market value below that of Google parent Alphabet.
Warren Buffett did not make the actual investment himself, meaning the order would have been placed by his stock-picking team Todd Combs and Ted Weschler, the Wall Street Journal reports. The paper says they are willing to invest in areas that Warren Buffett himself wouldn’t.
They are each thought to manage a $9 billion portfolio and usually make the smaller investments, while Warren Buffett makes the big bets.
The Apple holding makes Berkshire Hathaway the 56th largest shareholder.
Apple is not Berkshire Hathaway’s only technology investment. It is also the biggest shareholder in IBM and increased its holding in the first quarter.
However, Warren Buffett admitted at Berkshire’s annual meeting last month that his investment firm had been slow to get involved the new tech industry. He has always said he would not invest in companies he doesn’t understand.
On May 16, Warren Buffett also told CNBC that he would consider helping Dan Gilbert, chairman of Quicken Loans, finance a bid for Yahoo.
Warren Buffett is set to buy food giant Heinz in a deal worth $28 billion.
Warren Buffett’s Berkshire Hathaway company and private equity firm 3G have agreed to take over Heinz, famous for its ketchup and baked beans.
In a statement, Heinz called the deal “historic”, and the largest to date in the food industry.
Shares in Heinz soared nearly 20% in New York to hit the $72.50 price being offered.
And Class A shares in Berkshire Hathaway rose 1% to $149,240 a share – a record closing high.
The takeover has been approved by the company’s board, but still needs to be voted on by shareholders.
“The Heinz brand is one of the most respected brands in the global food industry and this historic transaction provides tremendous value to Heinz shareholders,” said Heinz chairman, president and chief executive William Johnson.
“We look forward to partnering with Berkshire Hathaway and 3G Capital, both greatly respected investors, in what will be an exciting new chapter in the history of Heinz.”
The deal will marry one of the best-known brands in the food industry with one of the US’s most famous businessmen.
Warren Buffett is one of the richest men in the world, having amassed a multi-billion-dollar fortune over decades of investing. His investment expertise has earned him the nickname “the sage of Omaha”.
“It is our kind of company,” Warren Buffett told CNBC.
“I’ve sampled it many times.”
“Anytime we see a deal is attractive and it’s our kind of business and we’ve got the money, I’m ready to go,” he said.
Warren Buffett is set to buy food giant Heinz in a deal worth $28 billion
3G Capital also owns the fast-food chain Burger King.
The deal will offer shareholders $72.50 a share, a 20% premium on the company’s previous all-time high share price.
Berkshire Hathaway will contribute $12-$13 billion in cash to the deal. In total around $23 billion of the deal will be in cash, with the rest in debt.
Heinz has been operating in the US market since it was founded in Pittsburgh in the late 19th Century.
Heinz says it sells 650 million bottles of its ketchup worldwide every year.
Emerging markets make up around a quarter of its global sales, Heinz said.
At a press conference following the announcement of the deal, 3G Capital’s co-founder Alex Behring assured Heinz employees the 144-year-old business would continue to be headquartered in Pittsburgh. But he said it was too soon to discuss potential cost-cutting measures.
If agreed, the deal would be the latest in a string of big deals announced recently, after merger activity suffered during the global financial crisis.
Earlier American Airlines and US Airways confirmed plans to merge, in an $11 billion deal to create the world’s biggest airline, and last week computer maker Dell announced a planned $24 billion takeover by its founder Michael Dell.
The UK’s Virgin Media is also set to be bought by Liberty Global for $23.3 billion.
Omaha, NE (NYSE: BRK.A; BRK.B)—An editorial in today’s Wall Street Journal says that “Berkshire Hathaway will enjoy an effective tax rate of 10.5% on the $300 million in dividends it will receive each year from Bank of America.” That statement is incorrect.
Warren Buffet saves Bank of America
Virtually all of the stocks that Berkshire owns are held in its property-casualty subsidiaries, and that will be the case with the Bank of America preferred.
The tax treatment for dividends paid by U.S. corporations to property-casualty insurance companies was materially changed by a law passed in 1986. The changes were described in detail in the chairman’s letter included in Berkshire’s 1986 annual report. A minor change in rate was made in 1993. Since that time dividends that insurers receive from U.S. companies incur an effective tax rate of 14.175%. For Berkshire, that rate will apply to dividends it receives from Bank of America.
Warren Buffet injects 5 billion in Bank of America
These moves are great news for the bank’s workers and shareholders, also as for the U.S. taxpayer, which will probably be around the hook if Bank of America’s management flies the business into a mountain. But numerous analysts think that Bank of America will require to raise a great deal much more capital prior to it gets back on sound footing. These analysts think that Bank of America is nonetheless overstating the worth of a few of the assets on its balance sheet. When the business is lastly forced to understand the actual values of those assets, this theory goes, the bank will as soon as once more need to fill a significant capital hole.
Warning: Why You Shouldn’t Follow Buffett Into purchasing Bank of America’s Stock
Why would a big bank like Bank of America, which is can get money from the Fed at an interest of no more than 0.25%, pay 6% to get cash from Buffett? The first plus is that it strengthens the balance sheet, but the tangible common equity is $128 billion, so what will $5 billion do? The bank just had to settle for over $8 billion a mortgage pushback situation, which is still not resolved. Buffett’s $5 billion will be used up quickly.
On September 24th, 2008, Buffett assisted Goldman Sachs (GS) by purchasing GS preferred stock at a 10% discount along with warrants for $5 billion. The warrants can be exercised at $115. The stock was around $110 a week ago. So, the warrants are below price.
Precisely how ended up being the actual moment for that? It turned out merely twenty days into the economic crisis, that didn’t conclude right up until five months later, on March 6th, 2009.
One week afterwards, on October 1st, 2008 he invested $3 billion in General Electric (GE), which required the money because the business paper market was frozen. The GE stock had a discount of 10% interest, similar to the GS investment. He obtained warrants to acquire $3 billion of stock options at $22.50. The stock was trading at $15 one week ago. The warrants are underwater.
Lets draw some conclusions: Two big companies, which in fact had divisions or subsidiaries in the business of funding companies, were happy to shell out 10% interest to acquire funds from Buffett. Wasn’t that a reasonable forewarning for the crisis? The warrants have become basically worthless. Therefore, it appears like Mr. Buffett has made a great interest rate, however otherwise absolutely no gain on the investments. Additionally, he still had to go through the deepening financial crisis in 2008-2009 that presented us to “within 10 minutes of shutting down the entire banking system,” according to Senator Chris Dodd.
Berkshire Hathaway business activities
Berkshire Hathaway and its subsidiaries engage in diverse business activities including property and casualty insurance and reinsurance, utilities and energy, freight rail transportation, finance, manufacturing, retailing and services. Common stock of the company is listed on the New York Stock Exchange, trading symbols BRK.A and BRK.B.
Bank of America Corporation announced today that it reached an agreement to sell 50,000 shares of Cumulative Perpetual Preferred Stock with a liquidation value of $100,000 per share to Berkshire Hathaway, Inc. in a private offering. The preferred stock has a dividend of 6 percent per annum, payable in equal quarterly installments, and is redeemable by the company at any time at a 5 percent premium.
Bank of America, Bryant Park, New York
In conjunction with this agreement, Berkshire Hathaway will also receive warrants to purchase 700,000,000 shares of Bank of America common stock at an exercise price of $7.142857 per share. The warrants may be exercised in whole or in part at any time, and from time to time, during the 10-year period following the closing date of the transaction. The aggregate purchase price to be received by Bank of America for the preferred stock and warrants is $5 billion in cash.
This apparently much-needed injection has reassured Bank of America’s clobbered shareholders, and the stock is up 25% on the news.
For his $5 billion, Buffett can also be obtaining the proper to purchase a staggering 700 million Bank of America typical shares at $7.14 a share–options which are currently within the cash. This signifies 7% dilution to Bank of America’s typical stockholders.
Put simply, Buffett is obtaining a favored safety having to pay 6% a 12 months that’s safeguarded from dilution from long term funds raises AND a choice to purchase 7% with the company–all for $5 billion. That is costly cash. But offered that Bank of America waited as well lengthy to increase funds, it is also obviously the very best offer they could get.
“We are building the best franchise in financial services and we have laid out a clear plan to deliver long-term shareholder value,”said Bank of America Chief Executive Officer Brian Moynihan.“I remain confident that we have the capital and liquidity we need to run our business. At the same time, I also recognize that a large investment by Warren Buffett is a strong endorsement in our vision and our strategy.”
Warren Buffett, Berkshire Hathaway Chairman and Chief Executive Officer commented:
“Bank of America is a strong, well-led company, and I called Brian to tell him I wanted to invest in it. I am impressed with the profit-generating abilities of this franchise, and that they are acting aggressively to put their challenges behind them. Bank of America is focused on their customers and on serving them well. That’s what customers want, and that’s the company’s strategy.”
Bank of America
Bank of America is one of the world’s largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 58 million consumer and small business relationships with approximately 5,700 retail banking offices and approximately 17,800 ATMs and award-winning online banking with 30 million active users.
Bank of America is among the world’s leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 4 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE: BAC) is a component of the Dow Jones Industrial Average and is listed on the New York Stock Exchange.
Certain statements in this press release represent the current expectations, plans or forecasts of Bank of America and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. These statements often use words like “expects,” “anticipates,” “believes,” “estimates,” “targets,” “intends,” “plans,” “predict,” “goal” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.”
The forward-looking statements made in this press release include, without limitation, statements concerning:the closing of the agreement with Berkshire Hathaway Inc. to sell preferred stock and warrants (the “sale agreement”) and the receipt of the aggregate purchase price in the transaction.Forward-looking statements speak only as of the date they are made, and Bank of America undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.
These statements are not guarantees of future results
These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict and are often beyond Bank of America’s control. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements. You should not place undue reliance on any forward-looking statement and should consider all of the following uncertainties and risks, as well as those more fully discussed under Item 1A. “Risk Factors” of Bank of America’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011, Item 1A. “Risk Factors” of Bank of America’s Annual Report on Form 10-K for the year ended December 31, 2010 and in any of Bank of America’s other subsequent Securities and Exchange Commission filings: the satisfaction of the closing conditions for the sale agreement, including obtaining any necessary regulatory or other approvals.