- Warren Buffett is in the business of saving companies to make a profit.
- The Oracle of Omaha looks to apply the same strategy as the novel coronavirus strangles multiple sectors of the economy.
- While helping businesses, Buffett’s enormous cash reserves allow him to make significant acquisitions.
In 2008, Warren Buffett dethroned Microsoft co-founder Bill Gates as the richest man in the world. At the time, the world was crumbling from the impact of the global financial crisis. But the Oracle of Omaha made tens of billions lending money to companies in dire need of capital.
Twelve years later, the world is in a more significant crisis, and the legendary investor is looking to make a killing.
Buffett Looks to Rescue Distressed Companies for a Steep Price
Warren Buffet is currently the fourth richest man in the globe, with a net worth of $70.5 billion. But before this crisis is over, he will likely have enough assets to overtake Jeff Bezos’ $116.9 billion wealth.
That’s because Buffett’s Berkshire Hathaway (NYSE:BRK.A) is sitting on a boatload of cash to the tune of $128 billion.
During the global financial crisis of 2008, the Oracle of Omaha made billions by throwing lifelines at banks and corporations. It would be a savvy move to employ the same strategy again.
At the height of the 2008 crisis, Goldman Sachs desperately needed to raise capital as liquidity dried up in the banking sector. Buffett invested $5 billion in the bank, which generated Berkshire Hathaway a profit of $3.7 billion three years later. He did the same for Bank of America. His $5 billion investment earned him a return worth $17 billion.
More than a decade later, Warren Buffett is once again on the prowl. The coronavirus pandemic has crippled multiple sectors of the economy. Airlines, hotels, casinos, and cruises are in a world of hurt. Buffett can offer a helping hand, for a price.
Warren Buffett Looking ‘For an Elephant-Sized Acquisition’
On top of extending help to distressed corporations, the Oracle of Omaha can just step in and take over a business. In a letter to shareholders, Buffett wrote that he and Berkshire Hathaway executive Charlie Munger have been hunting for “businesses that Berkshire will permanently own.” He added that they’re looking for an “elephant-sized acquisition.”
In another letter to shareholders, Buffett enumerates the criteria that they look for in a business which include:
- a solid management team
- attractive returns
- strong upside potential
- reasonable purchase price
The qualities sound familiar. Buffett has been looking for businesses that possess these key qualities since 1986.
As the coronavirus pandemic suffocates cash flow and revenue, Buffett has the pick of the litter at cost-effective prices. Why buy a small share of equity when you can take over the company?
With $128 billion in cash reserves, Buffett can make an elephant-sized acquisition and more. His moves in the coming months will put him in a great position to potentially dethrone Jeff Bezos and reclaim the richest man in the world title.
Disclaimer: The above should not be considered trading advice from CCN.com.
Last modified: September 23, 2020 1:48 PM