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Warren Buffett will help & acquire businesses during the coronavirus crisis with his huge cash reserves. The profit will be enormous. It could be large enough that Buffett will overtake Jeff Bezos as the world’s richest man.
In 2008, Warren Buffett dethroned Microsoft co-founder Bill Gates as the richest man in the world. At the time, the world was crumbling from the impact of the global financial crisis. But the Oracle of Omaha made tens of billions lending money to companies in dire need of capital
Twelve years later, the world is in a more significant crisis, and the legendary investor is looking to make a killing.
Buffett Looks To Rescue Distressed Companies For A Steep Price
Warren Buffet is currently the fourth richest man in the globe, with a net worth of $70.5 billion. But before this crisis is over, he will likely have enough assets to overtake Jeff Bezos’ $116.9 billion wealth.
That’s because Buffett’s Berkshire Hathaway (NYSE:BRK.A) is sitting on a boatload of cash to the tune of $128 billion.
During the global financial crisis of 2008, the Oracle of Omaha made billions by throwing lifelines at banks and corporations. It would be a savvy move to employ the same strategy again.
At the height of the 2008 crisis, Goldman Sachs desperately needed to raise capital as liquidity dried up in the banking sector. Buffett invested $5 billion in the bank, which generated Berkshire Hathaway a profit of $3.7 billion three years later. He did the same for Bank of America. His $5 billion investment earned him a return worth $17 billion.
More than a decade later, Warren Buffett is once again on the prowl. The coronavirus pandemic has crippled multiple sectors of the economy. Airlines, hotels, casinos, and cruises are in a world of hurt. Buffett can offer a helping hand, for a price.
Warren Buffett Looking ‘For An Elephant-Sized Acquisition’
On top of extending help to distressed corporations, the Oracle of Omaha can just step in and take over a business. In a letter to shareholders, Buffett wrote that he and Berkshire Hathaway executive Charlie Munger have been hunting for “businesses that Berkshire will permanently own.” He added that they’re looking for an “elephant-sized acquisition.”
In another letter to shareholders, Buffett enumerates the criteria that they look for in a business which include:
The qualities sound familiar. Buffett has been looking for businesses that possess these key qualities since 1986.
As the coronavirus pandemic suffocates cash flow and revenue, Buffett has the pick of the litter at cost-effective prices. Why buy a small share of equity when you can take over the company?
With $128 billion in cash reserves, Buffett can make an elephant-sized acquisition and more. His moves in the coming months will put him in a great position to potentially dethrone Jeff Bezos and reclaim the richest man in the world title.
(Sources Investopedia, MarketWatch, Finance Yahoo, CCN, Market Business Insider, Berkshire Hathaway Inc, Twitter)
Determining the Intrinsic Value of a Stock using EPS Growth Capitalization
You have found a good business with a high return on equity, low debt levels, healthy profit margins and a steadily increasing book value? Great, then it is now time to calculate the company’s intrinsic value to determine whether the stock price is low enough to invest!
Value investors are concerned with determining what’s called the intrinsic value of the companies they wish to invest in.
This intrinsic value nearly always differs from the actual trading price of the stock, presenting us with opportunities to buy for less than the company is really worth!
The following quote provides a definition of the term intrinsic value.
Intrinsic value is the discounted value of the cash that can be taken out of a business during its remaining life.
-Warren Buffett in Berkshire Hathaway Owner Manual