Berkshire Hathaway Chairman and CEO Warren Buffett
Happy birthday, Warren Buffett. The Oracle of Omaha turns 81 today -- but according to one commentator, he's already had his present.
That, of course, came in the form of the sweetheart $5-billion (U.S.) deal he concluded last week with Bank of America, under which he gets to collect a lush 6 per cent dividend while having an option to buy as much as 6.5 per cent of the company. David Weidner, writing at MarketWatch, concludes "this is a great deal for Warren Buffett. For everyone else, it's probably a loser."
Mr. Weidner suggests that anyone thinking of buying Bank of America to get a piece of the Buffett magic should look at recent history. Those who followed the world's greatest investor into the bailout deals he did at the depths of the financial crisis have little to show for it. General Electric shares are now selling around $16, well below the $24 they fetched when Mr. Buffett made his $3-billion investment in 2008. Goldman Sachs's stock price has gone up and down but is at much the same level now as when the billionaire anted up $5-billion for a chunk of preferred shares three years ago.
In both cases, of course, Mr. Buffett made out just fine because he negotiated sweeteners that aren't available to most shareholders. Overall, though, his results have disappointed. Since 2008, his flagship vehicle, Berkshire Hathaway, has trailed the S&P 500 index in total return.
Whatever your view of Mr. Buffett's recent performance, the halo effect of having him on board appears to be fading for Bank of America. Its shares are down about 3 per cent today. When he's finished blowing out the candles, Mr. Buffett will have to wish for better times ahead.
Ian McGugan