Buffett's shopping spree in 'bargain basement'
By Joe Ruff
Associated Press
OMAHA, Neb. — It's feeding time for billionaire investor Warren Buffett.
Associated Press library photo • May 5, 2002
The Oracle of Omaha is gobbling up assets on the cheap while many in the investment world are retreating or frozen with fear.
Berkshire Hathaway Inc. Chairman Warren Buffett, the world's second richest person, has a keen eye for bargains these days in the battered telecommunications and energy sectors.
"When people are scared, he wants to be buying, and when they are greedy, he will sell back to you," said Andy Kilpatrick, a stockbroker in Birmingham, Ala., and author of "Of Permanent Value, the Story of Warren Buffett."
Buffett has taken a particular interest of late in the severely beaten-down telecom and energy sectors.
On Thursday, Buffett's Berkshire Hathaway Inc. and Lehman Brothers Holdings Inc. gave troubled energy company Williams Cos. a $900 million loan. The collateral: Substantially all of Williams' oil and gas interests at Barrett Resources, which Williams acquired last year in a deal valued at about $2.6 billion.
Buffett, worth an estimated $35 billion, is the second richest man in the world behind Microsoft's Bill Gates.
Earlier in the week Buffett's MidAmerican Energy Holdings Co. agreed to buy Dynegy Inc.'s 16,600-mile Northern Natural Gas Pipeline for $928 million in cash. Analysts said Dynegy prized the pipeline as a moneymaker for the future, but the company's financial problems forced the sale.
That was the second pipeline acquisition by Buffett this year. MidAmerican bought Williams' Kern River Gas Transmission Co. for $450 million in March.
In the telecom sector, where overcapacity from the '90s boom has laid waste to dozens of companies, Buffett invested $100 million last month in fiber-optic cable company Level 3 Communications Inc. of Broomfield, Colo. The transaction, in conjunction with a $400 million investment by two other investors, immediately boosted Level 3 stock more than 50 percent.
There also were rumors that Buffett was interested in the bonds of Qwest Communications International, Kilpatrick said.
"This is classic bargain basement," Kilpatrick said of Buffett's recent moves. "He's buying them from a distressed seller and he's sitting on a lot of money."
Buying at low prices into solid companies like Coca-Cola and American Express, Buffett built Omaha-based Berkshire into a huge conglomerate with market value of more than $80 billion. Berkshire owns insurance, restaurant, furniture and shoe companies.
Berkshire lost book value last year for the first time, largely because of insurance losses from Sept. 11 — a $3.77 billion loss in net worth and 6.2 percent drop in per-share book value.
Nevertheless, Berkshire made $795 million, or $521 per share, and it outperformed the S&P 500, which showed an 11.9 percent loss in per-share book value.
