From today's WSJ:
Call Him E-Buffett: Famed Investor
Dips His Toe Into High-Tech Sector
By JOSEPH B. CAHILL
Staff Reporter of THE WALL STREET JOURNAL
Is Warren Buffett feeling smarter?
As part of his aw-shucks approach to investing, the Omaha, Neb., investor
has long said he doesn't buy stock in companies he doesn't understand,
and that has left him on the sidelines during the incredible boom in
technology stocks.
Mr. Buffett has at times ridiculed the Internet investment boom. At the
1998 meeting of Berkshire Hathaway Inc., Mr. Buffett's company, he
jokingly suggested that business schools ought to teach the principles of
valuing companies by asking students, "Here's the stock of any Internet
company. What's it worth? And anybody who gave an answer flunks."
Maybe palling around with Bill Gates, chairman of Microsoft Corp., is
easing Mr. Buffett's technology fears. A recent Securities and Exchange
Commission filing shows that more than a year ago, Berkshire invested in
First Data Corp.
That company is the dominant provider of back-office processing to
credit-card issuers, a mundane business, but it also is a leading maker of
online payment systems for electronic commerce, one of the industries Mr.
Buffett has avoided.
According to the 13F filing, Berkshire bought three million shares of First
Data, Atlanta, in the second quarter of 1998. Under a special arrangement
with the SEC, the closely watched filings disclosing Berkshire's holdings
are kept confidential for a year. And Berkshire's annual report only
discloses the names of its largest holdings.
Today, the First Data investment would be valued at about $130 million.
Because of the delay in releasing the filings to the public, it isn't known if
Mr. Buffett has increased, reduced or eliminated the First Data stake. First
Data shares rose 56.25 cents to $44.625 in New York Stock Exchange
composite trading Thursday.
Berkshire's investment portfolio is weighted toward old-line companies
with widely known brand names and entrenched market positions, such as
Coca-Cola Co., Gillette Co. and Walt Disney Co.
Some of those stocks, notably Coca-Cola and Gillette, came under
pressure last year. Mr. Buffett ruefully acknowledged in his annual letter to
shareholders that his equity investments "did not perform nearly as well as
the S&P 500" in 1998.
Whether the First Data investment means Mr. Buffett has decided to boost
returns by joining the Internet party can only be guessed at. He doesn't
comment beyond SEC filings and the Berkshire annual report.
Unlike such Internet highfliers as eBay Inc. and Priceline.com, which have
built towering stock market valuations on the promise of future profits,
First Data has big revenue and earnings today. The company posted net
income of $465.7 million, or $1.04 per diluted share, on revenue of $5.1
billion last year. It bills itself as the largest third-party processor of bank
credit-card payments. It even owns a venerable old brand name: the
Western Union money-wiring service. And it has significant operations in
Mr. Buffett's hometown of Omaha.
Now, First Data is trying to bring its processing expertise to the Internet. It
has partnerships with Internet portals Excite At Home, iMall Inc. and
Yahoo Inc. and processes payments for online merchants such as
barnesandnoble.com, Dell Computer Corp. and Ticketmaster
OnlineCitySearch Inc.
"I think Warren and others have figured out that there are going to be a lot
of payments processed on the Internet, and that's what we do," said Rick
DuQues, chairman and chief executive of First Data. Mr. Buffett's office
declined to comment.
The filing also showed that Berkshire unloaded all of its 11 million shares of
toy maker Mattel Inc. sometime in the second quarter of last year. The
stake was worth $450 million as of March 31, 1998. Berkshire also sold a
six-million-share position in SunTrust Banks Inc. as part of a general paring
back of its financial-services holdings. The SunTrust stake was valued at
about $435 million as of March 31, 1998.
Write to Joseph B. Cahill at joe.cahill@wsj.com |
