Warren Buffett Watcher

Warren Buffett/Charles Munger holding company Berkshire Hathaway has acquired Equitas, which was set up by Lloyd’s of London as a special arm of their insurance company to handle asbestos claims.

Berkshire Hathaway will assume all liabilities from Equitas, and also staff, operations, and the majority of assets. They would stand to make a good deal of money on the deal if asbestos claims remain at the expected level over the next decade. They have provided $7 billion in reinsurance coverage in case there are more-than-expected claims.

Although this deal is risky for Berkshire, and will lose money if there are a lot of unexpected claims, they are being heavily rewarded for taking on that risk. Lloyd’s was eager to dump the company to ease concerns that it would be asking individual investors who backed policies to pay for a bailout should Equitas go bankrupt. For this reason, they gave Berkshire quite a bargain on the deal, and we all know how much Warren Buffett enjoys a good bargain.

Technorati Tags: berkshire hathaway, warren buffett, equitas, asbestos, insurance

Wells Fargo is no longer a company that sells goods off the back of a wagon, but their steady income makes them a great pick for the likes of Warren Buffett, who does hold their stock among his many holdings.

Now a financial services company, Wells Fargo does community banking, wholesale banking, and financial advising. Its stock is listed on the S&P 500, along with the S&P 100 and S&P 1500 Super Comp.

The stock is trading near an all-time high, which usually scares away less experienced value investors who don’t realize that value is relative to estimated actual worth, as opposed to historical stock price. Warren Buffett is well-aware of this concept, as he made billions investing in Coca-Cola even after it had tripled in price in the years before he bought. If a stock is cheap compared to actual value, it doesn’t matter that it was once even cheaper.

Technorati Tags: warren buffett, stock picks, wells fargo

While not the first Warren Buffett-watching website on the world wide web, this is the first to be so liberal with alliteration in the first sentence of the first post. This will be the site to visit to find out what’s going on in Warren Buffett’s life.

I know, nobody cares about Buffett’s personal life. The name of his new bride eludes you, and you don’t care. The final price of his Lincoln Towncar on eBay is one of those facts that you hope you never learn. That said, there will be some personal stuff, but not Matt Drudge-style tabloid trash. Buffett is a fairly private individual, and the only information about his private life that will appear here is that which he allows to become public.

The real focus of this site is Buffett’s investments. He controls Berkshire Hathaway (along with Carl Munger), the biggest holding company in the country. Buffett does not invest in bad companies. He may (rarely) invest in a company and then see the stock drop for reasons he could not have foresaw, but the companies are always solid and never outright collapse.

I’ll write much more about what makes a company a possible Buffett target, but for now I’ll sum up most of it in a few short sentences. Buffett stocks are usually Graham stocks, although Buffett’s rules are not as strict as Benjamin Graham’s. He likes stable companies that are undervalued by the general market. For takeover targets he will often target slightly distressed companies that can be improved greatly with new management. More on that later…