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Senior Producer, Fast Money
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Companies including TD Ameritrade [AMTD
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], Coach [COH
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] and Turkey's Turkcell [TKC
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] could be on Warren Buffett's radar, according to a quantitative screen by Standard & Poor's based on the acquisition criteria presented in Berkshire Hathaway's annual report every year. The purpose of the screen is to find companies that the legendary investor might buy outright or at least take a sizeable stake in, according to Howard Silverblatt, Standard & Poor's Senior Index analyst.
Berkshire Hathaway [BRK'A
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] announced its largest acquisition ever today of railroad Burlington Northern Santa Fe for $26 billion, leaving the company with about $20 billion in cash left to play with.
"It just shows that at age 79, he is not slowing down at all," said Whitney Tilson, founder of T2 Partners, successful value investor and a Berkshire shareholder. "He's talked for years about bagging a big elephant."
With $20 billion left, the next elephants are likely to be smaller or even just stocks that Berkshire buys a portion of in the open market. Size most likely rules out some of the larger companies that made the S&P list, including Apple [AAPL
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], Cisco [CSCO
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] and Transocean [RIG
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]. But that doesn't mean Buffett couldn't buy a sizeable stake in these companies. Enhancing the credibility of the S&P screen as a predictor of possible new Berkshire holdings, Coca-Cola [KO
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] is on the list. Buffett is already the largest shareholder of that company, owning about 9 percent of the shares outstanding.
Buffett's next move with that cash may just be to increase the stakes in companies he already owns, said Karen Finerman, president of Metropolitan Capital and Fast Money Trader. She predicts he may add to Berkshire's Kraft [KFT
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] position once the company resolves its so far unsuccessful takeover attempt of British beverage and food giant Cadbury.
The acquisition criteria in Berkshire's annual report include "demonstrated consistent earning power","little or no debt", and "simple businesses." S&P then assigns more specific numeric parameters, based on past moves made by Buffett, that are meant to capture the essence of these vague metrics. The analysts at S&P also take the liberty of weeding out companies that are "overvalued" based on their discounted cash flow estimate.
One criteria where Buffett does get very specific about in the latest annual report is the size of the acquisition, stating it should be in the "$5-20 billion range." He let that one slide in making the Burlington purchase. Another interesing side note is that Disney's Bob Iger may have possibly beat Buffett to the punch on a purchase. Marvel Entertainment, which Disney agreed to buy outright in August, made the Oracle screen.
This, of course, is a parlor game. If you buy these stocks, buy them because they fit the value investing criteria that Standard & Poor's feels the Oracle of Omaha holds dear, not because a Berkshire purchase is imminent. Don't count on Warren and his partner Charlie Munger on reading this article for ideas either. They state very clearly in every annual report, "we are not interested, however, in receiving suggestions about purchases we might make in the general stock market."
Below is the S&P screen in its entirety, updated today kindly by Mr. Silverblatt.
ALCON INC
AMERICA MOVIL SAB DE CV -ADR
APPLE INC
BARD (C.R.) INC
BAXTER INTERNATIONAL INC
BECTON DICKINSON & CO
BG GROUP PLC -ADR
BMC SOFTWARE INC
BRITISH AMERN TOB PLC -ADR
BROWN-FORMAN -CL B
CHINA MOBILE LTD -ADR
CISCO SYSTEMS INC
COACH INC
COCA-COLA CO
COGNIZANT TECH SOLUTIONS
DIAMOND OFFSHRE DRILLING INC
ENCANA CORP
EXELON CORP
GRUPO TELEVISA SAB -ADR
INFOSYS TECHNOLOGIES -ADR
MARVEL ENTERTAINMENT INC
MCDONALD'S CORP
NOBLE CORP
NOVO-NORDISK A/S -ADR
ORACLE CORP
POTASH CORP SASK INC
PRECISION CASTPARTS CORP
RESEARCH IN MOTION LTD
SCHWAB (CHARLES) CORP
SIGMA-ALDRICH CORP
TAIWAN SEMICONDUCTOR -ADR
TD AMERITRADE HOLDING CORP
TELEKOMUNIKASI INDONESIA-ADR
TENARIS SA -ADR
TRANSOCEAN LTD
TURKCELL ILETISIM HIZM -ADR
WALTER ENERGY INC
SOURCE: Standard & Poor's
John Melloy is the Senior Editorial Producer for Fast Money. Before joining CNBC, he was an editor for Bloomberg News, overseeing the U.S. Stock Market coverage team.______________________________________________________
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Trader disclosure: On November 3rd, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Finerman's Firm Owns (BCR): Finerman Is Long (BAC) Calls: Finerman's Firm Is Long (BAC) Call Spreads: Finerman's Firm Owns (BAC) Preferred: Finerman's Firm Owns (FLS); Finerman's Firm Is Short (FLS)Calls; Finerman's Firm Owns (MSFT); Finerman's Firm Owns(NOK); Finerman's Firm Owns (PBR); Finerman's Firm Owns (PDE); Finerman Owns (PDE); Finerman's Firm Owns (RIG); Finerman Owns (RIG); Finerman's Firm Owns (WFC) Preferred; Finerman's Firm Is Long (TGT); Finerman's Firm Is Long (WMT); Finerman's Firm Is Short (IJR); Finerman's Firm Is Short (MDY); Finerman's Firm Is Short (SPY); Finerman's Firm Is Short (IWM); Finerman's Firm Is Short (UNG); Finerman's Firm Is Short (USO); Seymour Owns (AA); Seymour Owns (AAPL); Seymour Owns (BAC); Seymour Owns (EEM); Seymour Owns (SBUX); Seymour Owns (F); Seymour Is Short (FXI); Seymour Owns (POT); Terranova Owns (GS); Terranova Owns (RIMM; Terranova Owns Dec. Gold Futures; Najarian Owns (HGSI) Call Spread; Najarian Owns (INTC) & Short (INTC) Calls; Najarian Owns (LAZ) & Short (LAZ) Calls; Najarian Owns (RIMM) Call Spread; Najarian Owns (TEVA) & (TEVA) Call Spread; Najarian Owns (WFR) Calls; Najarian Owns (YHOO) & (YHOO) Puts
For Cliff Gallant
Gallant Owns Shares of (BRK.A)
KBW expects to Receive Compensation From (BRK.A)
For Pete Schiff
Schiff is Short the Dollar
Schiff Owns Gold
For Whitney Tilson
Funds Managed By Whitney Tilson Are Long (BRK.a) & (BRK.b)
Data is a real-time snapshot *Data is delayed at least 15 minutes