Buffett Puts Money to Work; Buys General Electric Preferred Stock

News just broke that Warren Buffett will purchase $3 billion of perpetual preferred stock with a 10% yield from General Electric (GE).  As part of the deal, he will also receive warrants to buy $3 billion in GE common stock at an exercise price of $22.25 at any time over the next five years (GE Press Release).

This follows on his investment last Tuesday in $5 billion of Goldman Sachs (GS) perpetual preferred stock, also with a 10% yield and warrants to buy $5 billion in Goldman common stock at a strike price of $115 at any time over the next five years (GS Press Release).

He also made a $4.7 billion bid for Constellation Energy (CEG) a couple weeks ago (Press Release).

Now, obviously Buffett is getting some very sweet deals (10% yields!) because of who he is.  However, I don’t think he’d be putting this money to work if he didn’t see some real value in these companies.  He’s getting an opportunity to invest in top-notch companies at discounted prices. 

This is a sign that there is starting to be value in the financial markets.

Disclosure: Top Gun has no position in General Electric (GE), Goldman Sachs (GS) or Constellation Energy (CEG) shares.

 

Comments

[longandshort:]

Someones got to call a bottom, I think its Buffet again..looks like it might be an OK Christmas

2008 Oct 01 02:45 PM

[Old Rick:]

Buffet once said that at the '74-'75 Market bottom, he felt like "..an over-sexed teenager in a wh0re house." For Buffet, making 3 big deals in a week means that he is probably feeling that way again.

2008 Oct 01 02:59 PM

[fnu149:]

Let me play devil's advocate. He said the gov't is the only who has the capacity to save the economy from collapsing. Yet, he said you should never borrow money to invest. But in a way, isn't the gov't borrowing the 700 billion to invest in this junk debt?

Afterall, I don't think his approach is really calling a bottom in Wall Street. He only loses if Goldman and GE defaults and these are very unlikely. At the same time he guarantees himself a very good yield. I think Mr. Buffett also wants to do his part in helping the US economy. If he doesn't make a move to help out good companies like GE and Goldman, there are not too many investors who can.

2008 Oct 01 03:36 PM

[moonbat1775:]

I reckon that since Buffet has made billions, he understands the economic system he has profited from. How about a few choice words then attacking the unstable and dishonest (FRB) banking system that underlies the economy?

2008 Oct 01 03:48 PM

[epeon:]

Buffet gets deals that no one else can. If I could get that deal I would buy those GE bonds, too. Of course, it dilutes the stock for the GE stockholders. The high interest costs comes of the earnings and hurts the GE stockholder, too. But, gee, there just little people so it is ok.

2008 Oct 01 03:49 PM

[Swiss Investor:]

I really feel good being a BRK shareholder right now.

2008 Oct 01 05:23 PM

[fanning:]

GE should offer to the public the preffered shares paying 10%, I will buy it too.

2008 Oct 02 07:58 PM

[lgldsr73:]

I was under the impression that the money invested in GE was in effect a loan to GE due to their financial mess. Any truth in this? Thanks - L.

2008 Oct 09 09:15 PM

[Trading:]

Does GE have ANY preferred stock available to the public?

Jul 28 12:10 AM