During the 2008 crash of the economy, many companies teetered on the edge of collapse, including some of the most prestigious in their industry. With his usual aplomb, investor Warren Buffett (BRK.B) was quick to see the opportunities in a number of wobbly companies and was willing to infuse money into them to both stabilize their futures and make a profit for himself and his shareholders. This October, Buffett began reaping some of the benefits of his investment in General Electric (GE) over the past few rocky years.
When financial institutions began to wobble in 2008, so many large companies were in the media light that companies like GE, with its broad base of operations, did not even make the list of top ten companies likely to fail. Many people were unaware that their financial arm, GE Capital, which made up one half of the company's revenues, was exposed to the widespread destruction that was plaguing the rest of the industry. General Electric stock plummeted, and the company announced it would not be increasing its dividend for the first time in 32 years. The company began a rapid shedding of its consumer-oriented business and re-focused on industrial opportunities in countries like China, where growth could be expected to continue for some time. The company began raising capital to stabilize the company and finance the re-structuring.
In the midst of the financial chaos of this period came Warren Buffett, the "Oracle of Omaha," who was able to cast his astute eye on the opportunities that the economic downturn presented to his well-heeled investment holding company Berkshire Hathaway (BRK.A). He stepped in for the GE rescue, offering the company $3 billion to shore up its faltering balance sheet, in return for preferred stock and warrants on common stock to expire in 5 years. In 2011, GE redeemed the preferred stock in full and made a fantastic return.
This week, the GE warrants were set to expire providing Buffett with an opportunity to recoup more profits from his investment in the troubled company. In the interim, GE's CEO, Jeff Immelt, has repositioned the company to take advantage of global markets that can provide increasing revenues for the company. However, GE profits have still fallen short of expectations. Regardless, Berkshire's investment in GE, amounting to about 10.7 million shares, will still provide the investment firm with a tidy profit for their financial rescue operation and continue to Make Berkshire Hathaway a super stock to own.