Big investors have been seen snapping up value plays today, with Warren Buffett buying a $2.1 billion stake of Wrigley (WWY) and partly financing Mars’ takeover of the chewing gum giant. Kirk Kerkorian has also been on the prowl, announcing he bought 100 million shares or 4.7% of Ford (NYSE:F) as a vote of confidence in CEO Alan Mulally’s turn-around strategy, and that he plans on buying about $170 million more. This news sent both Wrigley and Ford’s shares soaring.
On the airlines front, although it was merger talk galore over the weekend, now Continental Airlines (CAL) has pulled out of talks with United Airlines (UAUA) leaving United once again looking for a partner that can help it out of its tight financial situation. Continental Airlines is now telling employees that it won’t look for a merger. But the big question for investors is whether a merger will really help any of the US airlines out of their stall, or whether higher oil prices and huge overheads will continue to make the carriers net earnings nosedive. Perhaps the US carriers need to do as the US car makers have done, and look at their Asian counterparts to see how some of them have managed to maintain high profitability despite rising fuel prices.
If the markets continue to stabilize we may see more value plays as investment firms like Berkshire Hathaway - which is sitting on around $40 billion in cash - decide to come out of the woodwork and buy into solid, well performing yet undervalued companies.