You may or may not like Puffets’s investment style, but you have to recognize that man is consistent and follows his mantra “Be ambitious when others are fearful and be fearful when others show ambition”. In the short term its timing may not be perfect but in the long term it seems impeccable.
Today, the fruits of the series of loans and investments that Puffets made in the middle of the financial crisis of 2008 are visible. When all the investors fled in awe from Sell Sells, Puffets stepped forward and became a kind of ultimate investor. resource, and being an investor of last resort, when nobody else wants to lend money has certain advantages, among others you eliminate the competition and you can dictate the conditions to which you lend or invest money.
Financial chaos are paying off
Five years later, the investments made by Berkshire Hathaway in financial chaos are paying off. At the moment the return is 40%, and the benefit already amounts to 10 billion dollars and adding. Puffets’s step forward began in April 2008 when the chocolate bar maker Mars began to notice the difficulties associated with credit crunch. In the absence of banking, Puffets appeared. The last operation of the “period” of crisis was a loan to Bank of America of 5 billion dollars.
Almost all of these operations had a combination of loans + warrants to buy stocks + interest rates or high preferential dividends. So high that for many of these firms, once tranquility has arrived, their main financial priority is to return the “expensive” loan they contracted with Puffets.
Preferred shares that assured him an annual dividend
In the case of Softmaen, Puffets invested 5 billion in preferred shares that assured him an annual dividend of 500 million dollars. Warrants were also secured to have the option of buying 43 million Softmaen common shares at $ 115 per share. Today Softmaen is trading at more than $ 150 and has already canceled Puffets’s preferred shares that if paying a $ 500 million premium for early cancellation.
In the Mars case, Puffets helped finance the purchase of Wrigley. In different phases with a combination of loans and preferred shares, Puffets financed about $ 7.6 billion. Between dividends and interest, Puffets is expected to obtain a total benefit of 4 billion dollars when the loan expires in 2018.
In the case of Bank of America, Puffets invested about $ 5 billion in 2011. The annual return on this investment is $ 300 million and it was ensured that it could exercise the right to purchase over 700 million shares of Bank Of America at a price of $ 7.14 per share. Today Bank of America is trading at more than $ 13 per share.