Graham and Doddsville -- Value Investing In The New Era Message Board

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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era

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To: porcupine --''''> who wrote (424)	6/20/1998 9:14:00 PM
From: Freedom Fighter	Read Replies (1) of 1722

Berkshire and General RE Warren Buffett announced the purchase of General RE for 22 billion last night. A quick look at the deal leads me to believe that it's a great idea. He's buying it with stock. This makes it immediately accretive to earnings and book value since General RE is cheaper than Berkshire from a price to earnings and price to book value perspective. I'm not sure how the market will react to the deal though. Using stock for the purchase is an indication that he believes BRK is overpriced. A view I share. I consider it a very big plus though (I am a shareholder since 1988). It increases BRKs intrinsic value significantly in my view. Warren also inherits 18+ billion of bonds and 4+ billion of stock that are the investments of Gen RE. I am sure that 22+ billion in Warren's hand will be a big positive for both companies. The combination also readjusts the BRK portfolio in a way that is closer to 60-40 stock- bond/cash split. This represents a significant war chest in the event of a significant stock market downturn. He is now sitting on a nuclear arsenal of buying power. 30+ billion of cash and bonds. It also reduces the downside of his book value in a big decline since prior to this the mix was heavily titled towards equities that are somewhat pricey. So summing it up, I consider it a gigantic defensive and offensive move that significantly increases the value of his business while reducing his risk in an outrageously overpriced market!!!!! Net, I love this deal! I love this company! The man is a super genius! Who else can score big in the present while playing defense in the present and positioning himself for super offense in the future! WOW! members.aol.com

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