Buffett Took 4% Stake in Posco Last Year

Share of South Korean steelmaker Posco gained up to 3.8% today after Warren Buffett's firm Berkshire Hathaway Inc. disclosed it holds a 4% stake in the company. Buffett's original investment of $572 million has risen in value to $1.31 billion as of the close on Wednesday. Buffett did not say when the original purchases were made, but it is estimated that most of the position was acquired in 2005, when Posco shares were under pressure from Chinese competition. Posco shares have gained 75% since the beginning of last year, an impressive rally analysts attribute to expectations of further consolidation of the global steel industry after Mittal Steel bought Arcelor in 2006 for about $33 billion and Tata Steel agreed to buy Corus for $12 billion in January. Posco posted its first growth in net income in a year in 2006, and analysts expect earnings to improve further as high-end steel prices rise. Posco also signed a contract last year to build a $12 billion integrated steel complex in Orissa, India. In related news, shares of British food retailer Tesco gained 1.7% when Buffett disclosed his company holds a 2.9% stake.

Sources: MoneyCentral, Bloomberg, MarketWatch I, II
Commentary: Berkshire Discloses 4% Posco Stake, 'World's Finest Steel Company' • Adjusting Your Stop-Loss Upward: What I Learned From Trading Posco • "Steel" This Stock Idea: The Long Case for POSCO
Stocks/ETFs to watch: Posco [ADR] (PKX), Tesco PLC [ADR] (TSCDY.PK). Competitors: Arcelor Mittal (MT). ETFs: BLDRS Emerging Markets 50 ADR Index (ADRE), iShares MSCI Emerg Mkts Index (EEM)

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