Earlier this year, Berkshire Hathaway (NYSE:BRK.A) agreed to purchase Lubrizol (LZ) at a price of $135.00 per share. On Monday, Lubrizol's shares traded between $132.50 and $134.25 per share after the stock went ex-dividend.
At a price of $133.50, you get to buy something today that Warren Buffett has agreed to buy in the future for $135.00. While there may be unforseen circumstances yet to arise, I view this as a transaction that is extremely likely to happen. The closing date of the transaction is not certain, but Lubrizol expects the transaction to close by the end of the third quarter. While you only stand to make about 1% on the transaction, that 1% gets realized very soon. On the upside, that's an annualized return of over 6.66% in less than two months, if everything goes according to plan. On the downside, there is a chance that the transaction won't close and the price of Lubrizol will fall substantially.
I think there has been enough publicity surrounding this acquisition that if something were going to go wrong, it would have happened already, and I'm comfortable enough to put cash in LZ at prices of $133.50 and below. Now that prices are low, it's a great time to buy stock, so I don't want to put too much of my purchasing budget in this, but I do view it as a way to cordon-off a small amount for re-investment in the fourth quarter when there will certainly still be good deals to be found.