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Technology Stocks : (LVLT) - Level 3 Communications

LVLT 53.63

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Nov 1 5:00 PM EST

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To: Jesica Dawnet who wrote (3308)	8/19/2002 2:23:05 PM
From: H James Morris	Read Replies (2) of 3873

Diamonds are WB's best friend.;) >>What's Warren Buffett doing rummaging through the wreckage of the telecom and energy sectors? First he plunks down $100 million for telecom Level 3's convertible bonds, then he picks up a gas pipeline from troubled energy merchant Dynegy for $900 million and in the same week helps pump $2 billion in financing into ailing Williams Cos. Could this shopping spree be a sign that it's time for the rest of us to start tiptoeing back into the market's minefields? Not necessarily. Though it's true that Buffett is picking up some potential bargains--he paid Dynegy $600 million less for its moneymaking pipeline than Dynegy paid Enron just a few months earlier--it's nearly impossible for individual investors to duplicate his moves. Why? Rather than purchase common stock and hope for a rebound, he's buying either large bundles of bonds, which can offer investors more protection if a company goes belly-up, or physical assets like pipelines. If a company like Williams does emerge from the rubble, he's likely to make a mint. And if it doesn't, he'll have early dibs on its assets in a bankruptcy procedure. "Warren isn't gambling," says portfolio manager and noted Buffett watcher Robert Hagstrom. "He buys businesses that are not going to be changing a lot and that are mispriced so he can be rewarded over time." Still, investors can learn lessons from Buffett's moves. For one, he's not betting the farm: The $100 million he put into Level 3 may sound like a lot, but it's only a fraction of the cash in Berkshire's vault. Most of his money is in healthy businesses with predictable revenues. Second, he's buying what no one else wants and therefore getting it cheap. And third, he's making sure that he has a safety net--something telecom and energy investors probably wish they'd considered a year ago.<< fortune.com

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