Berkshire at New High Amid Speculation on Targets for Buffett's 'Elephant Gun'
Wall Street appears to like Warren Buffett's "itchy trigger finger" for a major acquisition and his economic optimism, two of the major themesin his new annual letter to shareholders, released on Saturday.
Amid a lot of speculation about possible targets for Buffett's reloaded "elephant gun," shares of Berkshire Hathaway rallied by almost three percent today, bringing both share classes to fresh 2-1/2 year closing highs.
Berkshire B closed up 2.8 percent at $87.20, its highest close since October 6, 2008.
The Baby Berkshires, adjusted for last year's split, went all the way down to a close of 46 on March 9, 2009.
From that low point just under two years ago, they are up almost 90 percent.
A similar story for the Class A shares. They're up 2.9 percent today to $131,300. It's the highest close since October 3, 2008. They closed as low as $72,400 on March 5, 2009 and have gained 81.3 percent from that point.
One of the few Wall Street analysts who follows Berkshire raised his rating on the stock to hold from sell. Meyer Shields at Stifel Nicolaus says Berkshire's non-insurance units recovered faster than he expected.
But he's still concerned that Berkshire won't be as quick and successful at seizing opportunities when Buffett is gone, especially since the plan calls for a new CEO and one or more separate investment managers. As quoted by Dow Jones, he writes:
Berkshire's success is appropriately attributable to Messrs. Buffett and Munger's willingness to deploy capital wherever in the economy they expect the greatest rewards. We can't help but expect the inevitable future bifurcation of responsibilities between the CEO and CIO(s) to add some friction to this process
There is one small development in the succession story. In the Risk Factors section of its annual report filed todaywith the SEC, Berkshire says its Board of Directors has identified "four current Berkshire subsidiary managers who are capable of being CEO." No names are listed, of course.
In the same section of last year's 10-K, the Board says it has identified only three subsidiary managers who are capable of being CEO.
As that guessing game continues, some investors are speculating on possible acquisition targets for Buffett's "elephant gun."
On Street Signs today, CNBC's Jim Cramer told us Buffett might take a page from Berkshire's "brilliant" acquisition of Burlington Northern Santa Fe and look for another company that moves things from one place to another, specifically energy. Cramer's possible candidates among pipeline companies: Energy Transfer Partners , Enterprise Products , Linn Energy , or MarkWest Energy .
With a market value of $37.1 billion, Enterprise Products would certainly qualify as a "major" acquisition worthy of Buffett's "elephant gun." If Berkshire pays cash, however, it would use all of its $38 billion on hand, and we know that Buffett doesn't like his company's cash reserves to go under $10 billion.
Energy Transfer Partners, with a market cap of $10.5 billion wouldn't completely drain Berkshire's cash and might qualify as "major" in Buffett's eyes.
Both Linn Energy and MarkWest are smaller, with caps of $5.7 billion and $3.3 billion respectively.
Street Signs also aired a separate discussion on Buffett's possible next moves with Legg Mason's Robert Hagstrom and CNBC's Kayla Tausche. Here's the clip: