Classic Buffett
Posted
Apr 28 2008, 04:00 PM
by
Matt Koppenheffer
"Classic Buffett." Those were the words that The Wall Street Journal's Deal Journal tagged onto the $23 billion deal for William Wrigley Jr. Candy maker Mars is buying the bulk of the company, but Berkshire Hathaway is taking a $2.1 billion minority interest in the deal and has also offered $4.4 billion in subordinated debt financing.
The beautiful thing about this deal, though, is that it shows once again what makes Buffett, well, Buffett. It's a crazy market out there right now and there have been any number of rumors swirling as to where The Oracle of Omaha might throw some of his Berkshire billions. Certainly it wouldn't be something outside of his circle of competence like solar cells or software. He's not known for chasing after the hottest sectors either, so it's not surprising he hasn't been buying into mining or potash. And every rumor so far of him backing up one of the struggling financials has fallen flat.
But how about gum? For those that follow Buffett, his part in this deal shouldn't be surprising at all. For years he's talked about gum as one of those things that just doesn't change -- and that's what makes it such a great, stable, predictable business. He's even mentioned William Wrigley by name in the past.
The piece of Wrigley that Berkshire will be chewing is relatively small, but it serves to underscore Buffett's view of investing. While the market continues to bounce around, we'll likely see a lot of speculation on the future of many groups -- the financials in particular. There will no doubt be bigger winners than Buffett, but there will also be plenty of much bigger losers. Buffett’s Berkshire, however, is one of the few players that's a shoe in for the winners column.
Nearly 2,000 investors in The Motley Fool's CAPS community are convinced of this and think that Berkshire's stock price will outperform the rest of the market as a result. One of these Berkshire bulls, mikeswood, recently gave the stock a thumbs up and said,
Two words: Warren Buffet. The guy is opportunistic and forward seeing. As long as he is at the head of Berkshire Hathaway, expect this company not only to outperform the S&P, but by a long shot.
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