Buffett's Tiffany Debt Purchase Not a Good Reason to Jump In

Warren Buffett is on the move again by purchasing $250 million worth of debt from Tiffany’s (TIF). Half of the debt will mature in 2017, while the rest will mature in 2019.

Tiffany said the proceeds of the Notes will be used to refinance existing indebtedness and for general corporate purposes. Unlike Berkshire’s investments in General Electric (GE) and Goldman Sachs (GS), these notes do not have warrants attached to them.

This is another one of the legendary Wizard of Omaha investments in high profile companies. His list of fixed income or preferred stock investments range from Goldman Sachs, General Electric, USG, Swiss Re and Harley Davidson (HOG). In his article, Buying American, Buffett expressed his bullishness on the future of US economy and stock market. Once again however, it’s always good to read between the lines, as Buffett’s Berkshire Hathaway (BRK.A) doesn’t seem to have purchased any common stock in the above-mentioned names. His holding company has rather gained preferential terms with the companies that received “Berkshire Hathaway Troubled Assets Relief Program”, as his name carries a very good premium.

I would not be investing in Tiffany’s based off Buffett’s fixed income play there; the company does appear to have a good presence in the luxury goods market. The current crisis hasn’t missed this jewelry retailer, which warned last month that its same-store sales for the holiday season fell 24 percent as sales slowed in its domestic stores.

It would be interesting to note if TIF would keep its dividend payment. Other similar Berkshire investments such as Harley Davidson cut their dividend payments just days after announcing Buffett’s investment in their fixed income notes. General electric on the other hand has not announced any cuts, although many investors believe that the dividend is on the chopping block.

Disclosure: None

Comments

[Andrew Meri...:]

The issue should not be if you should invest in Tiffany. The issue is should you invest in Berkshire Hathaway? He is currently earning around 10% on close to $15 Billion. Clearly he loves his jewelry stores. I would not be surprised if he already has a stake in Tiffany to compliment his recent moves. I think the smart move would be to invest along side him rather then follow independently.

Feb 17 03:00 PM

[Evelyn Guzman:]

I still believe we should have faith in Warren Buffett as not only is he a good investor but also he is a good man. He is showing optimism in the market to save us all I guess because if we stop investing and the market falls to depression level, where would that lead us?

Evelyn Guzman
www.debtchallenges.com (If you want to visit, just click but if it doesn’t work, copy and paste it onto your browser.)

Feb 18 07:37 AM

[Rhett:]

Buffet is a good man, but BRK is down over 30% and falling as of yesterday.

Feb 18 09:09 AM

[Brian Donal...:]

Blindly investing after Buffett doesn't make sense to me. Go and read the TIF financial statement, balance sheet, annual report, and prospectus first before being a follower of every single move Buffett makes.

Feb 18 12:39 PM

[Andrew Meri...:]

Blindly investing does not make sense. If people want to benefit from Mr. Buffett's investment choices they should invest in Berkshire Hathaway and leave investing to him.


On Feb 18 12:39 PM Brian Donaldson wrote:

> Blindly investing after Buffett doesn't make sense to me. Go and
> read the TIF financial statement, balance sheet, annual report, and
> prospectus first before being a follower of every single move Buffett
> makes.

Feb 19 03:12 AM

[Andrew Meri...:]

Berkshire is down and approaching 52 week lows. Meanwhile he has put close to 15 billion to work earning 10% on average. At some point Berkshire Hathaway will benefit from the investments made during this difficult time.


On Feb 18 09:09 AM Rhett wrote:

> Buffet is a good man, but BRK is down over 30% and falling as of
> yesterday.

Feb 19 03:15 AM