Thursday, September 25, 2008

Warren Buffett Goes Prospecting

It looks like the Sage of Omaha may have struck gold with this one. He is famous for his buy-on-the-cheap strategy and has invested $5 billion in big-name Wall Street bank Goldman Sachs as the stock price fell to almost 55% below its 52 week high. He'll get preferred stock which pays a 10% dividend. He'll get warrants, which unlike those in the legal community are a good thing in the investment world. They will allow him to buy $5 billion in common stock at a strike price of $115. Goldman closed yesterday at $133. These warrants, if exercised (they will), must be made within the next five years. And best of all (for him) he didn't buy any of the Love Canal mortgage assets.

This is his first drink to satisfy his long thirst for ownership in the financial services sector.

By the way, Mr. Buffett's investment was made through his Berkshire Hathaway buy-and-hold black hole. BRK.A closed yesterday at $133,500. It has never split.

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