Berkshire announced that it will acquire the natural gas business assets of Dominion Energy for a transaction value of $9.7 billion, of which 4 billion will be used to acquire natural gas business assets and 5.7 billion will be related liabilities.
I don’t know how you feel about seeing this news. Do you have any doubts? I don’t anyway, because this is too Buffett.
- Timing
When the panic caused by the epidemic was most serious, Buffett did not buy and buy, instead, he cut off a lot of stocks. Many people said that he deviated from the principle of “greedy when others panic”, or he couldn’t get new things. Many people may know that during the financial crisis in 2008, Mr. Buffett copied Goldman Sachs and General Electric, which are two big companies, so he has a high reputation for catching the bottom. He invested $5 billion and $3 billion in convertible preferred stock for Goldman Sachs and GE, respectively, with a 10% interest rate on the preferred stock, plus the value of the warrants attached, which was a very cost-effective deal for Buffett.
But Buffett’s real big move during the financial crisis was not to buy the two companies at low price, but to buy all the remaining equity of BNSF (Burlington Northern Santa Fe Railway), which cost 26.5 billion US dollars. The main stocks purchase of Buffett during the financial crisis are Goldman, GE and Swiss Re. Among them, only the trading timing of Swiss Re is particularly accurate, and the rest of the transactions are not perfect. Buffett never said he was good at timing. This acquisition of dominion happened at a time similar to BNSF.
2. Target.
What’s good about traditional energy companies? Buffett loved the energy business. He bought PetroChina, ConocoPhillips, and cleared Phillips 66 in the first quarter. Buffett’s love of public utilities such as energy and railway is a little similar to Li Ka Shing. Li Ka Shing also bought Telecom and energy assets a few years ago. One is the God of stocks, the other is superman. Why do he love these unimaginative assets? Here, I’ll talk about BNSF as an example, a railway company.
Many people may not be familiar with this railway, but if you are familiar with the history of American oil industry, you will not be unfamiliar with this railway company. In the early years, the pattern of railway companies was uncertain and faced with fierce price competition. Some oil companies even wanted to build their own railways to avoid freight charges. Standard oil companies, relying on their monopoly advantages, pushed down the price of railway freight. Now, would you like to build a railway? To Buffett’s moves, the most important thing is the competitive pattern. Now, is the BNSF competitive pattern very good? No one will compete with it any more. It is reported that the railway freight is also increasing year by year, reflecting the optimization of the competition pattern. And this kind of company, it’s so safe that you can’t even imagine that he will go bankrupt because of anything. There is no competition, no R & D, no expansion, high pricing power. To sum up, that is an amazing investment.
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