Buffett was quoted:
"We haven't seen any (investments) we want to move on. That doesn't mean we won't
in the next six months"
Is this a judgment call on the sector? May be not. Remember that Buffett has 37% of his portfolio in financial companies, bank or insurance. Earlier this year he purchased BAC, and added to his holding of US Bankcrop and Wells Fargo.
Also most of the capitulation happened in investment banks, which Buffett do not like due to earning volatility. He has made an investment in Solomon Brothers, which I think he regrets, indicating from his shareholder letters. Buffett did not like the selfish culture of traders and investment banking. And found that earnings are less than easy to read and evaluate. So when he says that no opportunity exists, in his mind the sector in good times is not a good one to won let alone in bad times.
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Here are a few good backgrounders
Fortune Magazine Dec 24
Berkshire Hathaway
Let's dispense with the obvious. Warren Buffett, Berkshire Hathaway's illustrious chairman and CEO, is 77 years old. The line of succession remains murky. Berkshire's insurance businesses have benefited from unusually benign weather- namely, the dearth of U.S. hurricanes. And Berkshire stock has already risen 22% since August.
So why are we recommending Berkshire (BRK.B) now? Simple. Warren Buffett knows how to exploit panics. He bought 5% of American Express in 1963, following a financial crisis (involving vegetable oil, of all things) that had cut AmEx's stock price in half. He started buying up shares of Geico in 1976 when claim-cost miscalculations left the auto insurer teetering near bankruptcy. And he picked the pocket of financially troubled energy company Dynegy in 2002, paying $928 million for a natural gas pipeline that Dynegy had bought for $1.5 billion only months earlier.
With $40 billion in cash idling on Berkshire's balance sheet at the end of the third quarter, Buffett looks ready to plunge in should a financial company, bond insurer, or homebuilder with attractive land assets need a white knight. (Indeed, in early December, Buffett bought $2.2 billion in high-yield bonds from Texas power company TXU at a discount.)
"He's going to wait for the fat pitch and pounce," says ace value fund manager Jean-Marie Eveillard, explaining why Berkshire remains the biggest stock holding in his First Eagle Global fund, even though he believes Berkshire's market cap exceeds the value of its businesses. "The current circumstances in the economy and possibly in financial markets are exactly the kind of environment where Buffett will be able to see and seize opportunities."
Buffett buys 60% stake in Pritzker firm
Berkshire Hathaway to take full control of Marmon Holdings and its varied manufacturing interests within 6 years.
December 25 2007: 7:12 PM EST
NEW YORK (CNNMoney.com) -- Warren Buffett's Berkshire Hathaway is paying $4.5 billion for a 60 percent stake in Marmon Holdings Inc., a privately-held conglomerate controlled by the Pritzker family in Chicago.
The acquisition was announced Tuesday by Buffett, the legendary investor who serves as chairman and chief executive of Berkshire Hathaway, and Tom Pritzker, chairman of Marmon. The deal is expected to close within the next three months.
Berkshire Hathaway (BRKA, Fortune 500) will take control of 60% of Marmon and acquire the rest of the company within six years, according to a joint statement.
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